Pledgeability of Intangibles

In this paper, I examine why the intangibles that have their roots in reputation premium factored out by the combination of unverifiable features of the asset, cannot be pledged credibly and further discuss why there is a need to find a robust way to factor them. Using the structure of one principle and two-type agent model, the paper applies the above rationale on two case studies - one is the credibility of social skills and second is the relation between team effort and team performance. In study-one, the substitution of objective function by the quality of social skill or the overweighing of the quality of social skill in agent's objective function by the principle in the principle's utility maximization problem occurs. This study explains why the application of good social skills evidenced in good behavior fails to achieve its desirable level. Here, a principle is a planner entrusted to deploy resources (time, capital, asset etc.) or make suggestions for their deployment among agents of two types. In study-two, the division of minority vis-a-vis majority is explained where minority emerges due to social planner's utility maximization problem within which the objective functions of the other agents are the combination of tangible and intangible variables. This minority-majority divide prevents the attribution of team performance to team effort and concludes that deserving as well as non-deserving can take the credit of the work