Hi, it's me, I'm the [principal-agent] problem

        Recently we’ve discussed the principal agent problem in class, and I have come to realize that I am in fact a contributor to this problem at my own place of work, The Virginian Restaurant. The Principal Agent Problem occurs when an agent, assigned or hired to carry out the preferences or desires of the principal, have different preferences, and therefore act against the preferences of the principal in order to fulfill or works towards their own private preferences. This occurs for a variety of reasons, and is caused at times by lack of oversight and asymmetric information. I realized during class one day, that I, in fact, contribute to this problem. When I work as a bartender or server, I am an agent, hired by the owner of the restaurant, UVA alum Andy McClure, to carry out his preferences – at times my preferences and Andy’s do not always align.

Andy does not believe in pooling-tips (a conversational restaurant policy), as he believes this does not provide his employees the right incentives to provide quality customer service and sales – but this also provides me new incentives so I can make the most money. My preferences include setting my good friends up with good deals when they come visit me during long shifts, and making as much tip money as I can. The other week, one of my best friends Katie Taulbee came in while I was bartending for a brief pregame and rundown before heading out to some kind of function. She came in, told me all her wonderful plans for the night and told me she would inform me of any fun things or drama that may occur as soon as she could. I promptly gave her two shots of Ketal One Vodka (a mid-shelf vodka option at the Virginian) and sent her on her way. I was pleased because I had been able to treat my friend and chat with her, but also, I don’t think Andy would be pleased that I gave away some of his vodka. Alas, he wasn’t there (no oversight!). Another week my sister and her friends came down from DC, and spent the night at the bar with me. I would charge them for drinks, but at a discounted price, which granted me great cash tips from them (which I don’t get taxed on). I fulfilled my preference of making great tips, but I was also shirking Andy a little bit (Andy, I hope you never come across this blogpost).

There is opportunism in discounting my customer's drinks, as it provides incentives for them to give a bigger tip, which ultimately goes just to me, not to Andy. Tipping as a system provides incentives for working hard, but also for shirking the restaurant owner in order to make personal gains.  Nonetheless, I do really love my job and this bar, so I be sure to give only certain, and very deserving customers, special treatment once and awhile, as at the end of the day, I want the restaurant to succeed too (or I’m out of a job).