Economics Articles

Essays on topical issues, latest developments in UK and global economies, and answers to readers questions

Principal-Agent Problem

Posted on April 25, 2017

The principal-agent problem occurs when a principal delegates an action to another individual (agent), but the principal does not have full information about how the agent will behave. Secondly, the interests of the principal diverge from that of the agent, meaning that the outcome is less desirable than the principal expects.   Shareholder and manager …


Measuring utility

Posted on April 22, 2017

Utility is a concept given to how much satisfaction/happiness a person gains from a particular action. Utility derived from the philosophy of utilitarianism. An early advocate of Utilitarianism was Jeremy Bentham who argued that utility was the accumulation of pleasure and avoidance of pain. The concept was refined by others such as J.S. Mill who …


What is the opposite of shrinkflation?

Posted on April 3, 2017

Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same.  Shrinkflation is as an alternative to inflation. Rather than increasing prices you get a smaller quantity. To buy the same quantity you have to spend more. Recently, it has received a lot of press attention, and The OED …