# kaal:claim:3808852-009

**Claim.** Because of human shortcomings, bounded rationality, incomplete foresight, and information asymmetries, it is impossible for principals to contract for every possible action or inaction of the agent so as to induce the agent to act in the principal's best interest.

**Type.** condition  **Support.** evidenced

**Holds when.**

- applies to principal agent relationships in limited liability entities

**Source quote.**

> bounded rationality, incomplete foresight, and information asymmetries between principal and agent,7 it is impossible for principals to contract for every possible action or inaction of the agent in order to induce the agent to act in the best interest of the principal.

**From.** Wulf A. Kaal, *Decentralization and Feedback Effects* (2021), III. Organizational Decentralization, page 9

**Cite as.** Wulf A. Kaal, Decentralization and Feedback Effects (2021). SSRN: https://ssrn.com/abstract=3808852

**Verify.** sha256 of source PDF `31e91158fdeefebc2f0be54ebf89751f7cdd4c89ecea932888f5ba9be6b1caba` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202021%20-%20Decentralization%20and%20Feedback%20Effects.pdf

**Topics.** risk-and-incentives, disclosure

**Keywords.** agency-theory, incomplete-contracts, bounded-rationality, information-asymmetry

**Related claims.**

- restates: https://wulfkaal.github.io/claims/3373393-008
- extends: https://wulfkaal.github.io/claims/2992962-030

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.