The principal-agent problem is:
A)when the principal has less information than the agent.
B)when the principal has more information than the agent.
C)when the agent has less information than the principal.
D)not observed in reality.

Question

Quizplus · Accepted Answer

The principal-agent problem occurs when the principal (e.g., employer) has less information than the agent (e.g., employee), leading to issues like moral hazard or adverse selection.

The Principal-Agent Problem Is