Principal Agent

While I have never really been an agent of multiple principals myself, I do know that my father acts as one due to his job. My father works at IBM, working both to secure deals and to help with both designing and implementing things that client companies want. To this end, he is an agent of both IBM and the client company that he is working with. While I do not know the specifics of what he is instructed to do for the companies, I can only assume that my father’s goal as an IBM agent is to gain a deal that is the most beneficial to IBM while at the same time making sure that the client company is getting the service they desire while not spending enough money and effort to make the deal not worth it. In simpler terms, one side is trying to spend less for a service while the other is trying to get more for performing that service. Attempting to reach a middle ground is the role my father performs. In this case, despite the inherent contradiction between the two objectives, it is simply finding out what services are between both what the client is willing to pay, and the cost IBM pays to perform it in order to maximize the benefits for both sides. 

If it is impossible to make it perfectly even and instead results in a deal that benefits one side while the other remains unchanged, my father will pick it without hesitation. This is because of something that the principal agent model cannot quantify, loyalty and reputation. If IBM suffers no detriment or benefit from a deal and the client only benefits, than the deal instead ensures that the client will return to IBM in the future and remain partnered with them, as it allows the client to think that IBM has their interests in mind while also getting the service they want and seeing the quality of it firsthand. The willingness of high profile companies to stay in turn makes IBM more distinguished and through its reputation draw the attention of more high profile clients. Even if the deal did not provide tangible benefits according to a principal agent model, the factors of economics which are not seen within the model make up for it. 

In a situation in which the factors of reputation did not matter, there was no mutually beneficial option but there are two different options where one side stands to gain without the other side suffering a loss, then my father would try to get the deal that favors IBM. This is due to his own self-interests. This is because despite being an agent of both principals, his primary affiliation and the one that is directly related to his own self-interest is IBM as that is the company he is employed by. Therefore he has more to lose is he is perceived to have failed in the eyes of that principal as he has much more to lose.  In other words, when an agent is serving two principals and there is not an option that will benefit both of them but there is a choice between outcomes that favors one party without causing a detriment to the other, the agent will pick the choice that best aligns with their own self-interest. 

Finally, if a situation were to arise where the only outcomes that result in any benefit to one principal cannot be achieved without causing detriment to another, an agent might try to negotiate with the principal to convince them to accept the deal. As stated previously, there are factors that exist outside the principal agent model that can influence whether or not a side is willing to agree to a deal. This can be done by raising the value placed on the deal by bringing up factors that have long term gain in spite of short term loss, among other things.