In this chapter we analyze the behavior of individuals in organizations. We attempt to separate two types of problems confronted by organizations in pursuing their goals: (1) technical-administrative problems that would occur even if all their members were dedicated to the fulfilment of the goals set by their controllers, and (2) agency-managerial problems that are rooted in the divergence among the preferences and goals of at least some members of the organization, including differences between its controllers and its agents1.