The principal-agent problem refers to the fact that the agent's goals:
A) do not always coincide with those of the principal.
B) coincide with those of the principal.
C) do not overlap with those of the principal.
D) overlap with those of the principal.

Question

Quizplus · Accepted Answer

The principal-agent problem arises when the agent, who is responsible for carrying out tasks on behalf of the principal, may have goals and incentives that are different from those of the principal. This can result in a conflict of interest where the agent may prioritize their own goals over those of the principal, which can lead to suboptimal outcomes for the principal. Therefore, the answer is A - the agent's goals do not always coincide with those of the principal.

The Principal-Agent Problem Refers to the Fact That the Agent's