It is in the interest of all parties to develop efficient solutions to agency problems through ______ so that more wealth can be shared among the contracting parties.
A)adverse selection
B)value maximization
C)contracting until marginal benefit (MB)equals zero
D)implicit contracts

Question

Quizplus · Accepted Answer

Value maximization refers to the process of making decisions that maximize the value or wealth of a firm, which implies that all parties involved in the transaction should benefit. By focusing on value maximization, the parties are more likely to find solutions to agency problems that are efficient and beneficial to everyone involved. Adverse selection, contracting until marginal benefit equals zero, and implicit contracts are all important concepts in contract theory, but are not directly related to developing efficient solutions to agency problems.

It Is in the Interest of All Parties to Develop