The principal's expectation of opportunistic behaviour by his or her agent results in lower payments to:
A) The agent
B) The principal
C) The principal and the agent
D) Neither the principal nor the agent

Question

Quizplus · Accepted Answer

If the principal expects opportunistic behaviour by the agent, he or she will not trust the agent completely and will offer lower payments to the agent. This is because the principal expects the agent to act in his or her own self-interest rather than in the best interest of the principal. Therefore, the principal will try to protect his or her own interests by reducing the payments made to the agent.

The Principal's Expectation of Opportunistic Behaviour by His or Her