Tigers and Bears : Mechanism Design in Corporate Governance

Mechanism Design Theory as a subset of Law and Economics study has great potential in Corporate Governance. The application of this outcome-oriented system in business organizations lies in the firm acting as a mechanism itself, utilizing smaller mechanisms to reach the predetermined optimal outcome. Although it may seem daunting to incorporate a new line of thought into major organizational structures, Mechanism Design Theory in governance is not a new concept and has been implemented with great success numerous times on a national level. If the system has been used to guide nations out of uncertainty and into economic booms, then it stands to reason it can be applied to individual firms as well