Which of the following do not apply to "superstar" salaries?
A) They are astronomical compared to even the salary of the second best performer.
B) A premium is paid even if the star is only a marginally better performer than the second best person.
C) They resolve the principal-agent problem.
D) They magnify small differences in skill into large differences in pay.

Question

Quizplus · Accepted Answer

The principal-agent problem refers to the difficulties in motivating one party (the agent) to act in the best interests of another (the principal) rather than in his or her own interests. Superstar salaries do not inherently resolve this issue; they are more about compensating perceived value and marketability rather than aligning interests or motivations between parties.

Which of the Following Do Not Apply to "Superstar" Salaries