By analyzing the case of Ryanair mistreating its employees and applying related economic theory, it is clear that agency theory is occurring here. An agency relationship is an arrangement whereby one party, the principal, appoints another party, the agent, to perform a service on behalf of the principal. (Brickley, Smith) In this case Michael O'Leary would be the principle and the agents would be the pilots. Ideally the incentives of both principles and agents would be aligned. However in this scenario the agents/pilots had unfair contracts and were expected to pay for their own training. This was deemed not to be sufficient compensation for the pilots and Ryanair's public image suffered. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Using agency theory we can deduce that Michael O'Leary is trying to maximize profits for personal gain, i.e. he will receive a bonus if certain funding goals are met. Agents have their own incentives to protect their well-being if it is threatened, even at the expense of the principle. This is clearly evident in the case of Ryanair. We can assume that the reasoning behind the decisions made by those involved as actors in the Principle/Agent relationship have information about themselves that others could not possibly be aware of. This information deficit between operators can cost companies dearly. When information is distributed unevenly, those with a higher degree of information may engage in opportunistic behavior. It is unclear why O'Leary chose to employ his pilots in this manner, but he showed complete disregard for their basic needs. Economics is all about trade-offs and this is an example of trading a decent work environment/customer service for profit maximization. It could also be a way for RyanAir to increase its customer base and this idea is explored in a related paper. “Companies try to signal that its costs are low and therefore that it is worth it for customers to do business with it in the future since their prices will also be low.” (Kyle Bagwell's 1986) Analyzing Ryanair's problems using agency theory it is clear that for the airline to continue to operate successfully in the market things must change. As explained above, if other airlines are able to offer better contracts for pilots, they will look for worse elsewhere, which not only loses money for the company due to flight cancellations. But the constant negative publicity surrounding the company will not become a thing of the past. Ryanair will have to compensate their workforce properly otherwise their rivals will benefit, so paying this extra money maybe won't benefit Ryanair in the short term, but in the long term they can develop a new image for themselves. Ryanair could also spend more money to properly train not only its pilots, but also flight attendants, to ensure that incidents like the video that went viral last week are prevented in the future. If a boycott actually takes place, it could cost Ryanair millions, proving once again that spending money in the short term and improving its image will save money in the long run. After reflecting on the economic theory used in this case study, it is clear that VW's management and ownership structure make it “reasonable to urge the adoption of a.