Rank #62

Principal-Agent Problem

The Principal-Agent Problem is a situation in which one party, known as the principal, delegates work to another party, known as the agent. The agent is expected to act on behalf of the principal, but the two parties have different interests and may have different objectives. This can lead to

From Wikipedia

The principal–agent problem refers to the conflict in interests and priorities that arises when one person or entity takes actions on behalf of another person or entity. The problem worsens when there is a greater discrepancy of interests and information between the principal and agent, as well as when the principal lacks the means to punish the agent. The deviation of the agent's actions from the principal's interest is called "agency cost".

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