MANAGING THE MANAGER - AN APPLICATION OF THE PRINCIPAL-AGENT MODEL TOTHE HUDSONS-BAY-COMPANY

Controlling the ability of agents to operate in their own self-interes t motivates much of the recent industrial organization literature. How ever, that literature is generally intractable to empirical testing. Y et we need to know whether firms can successfully attenuate managerial opportunism. The Hudson's Bay Company provides the context, and its r ecords provide the data, for our analysis. We model its agency problem and using that model we simulate and calibrate the company's experien ce. Our numerical estimates show that agency was a potential problem f or chartered companies, but the Hudson's Bay Company had control of it s managers.