The challenge that arises when one actor tasks another to carry out their wishes in the presence of uncertainty and unequal information is called the ______ problem.

Question

Quizplus · Accepted Answer

The principal-agent problem describes a situation where one party (the principal) hires another party (the agent) to carry out a task on their behalf. This creates the potential for a conflict of interest because the principal may not have complete information about the agent's actions and decisions, and the agent may be incentivized to act in their own self-interest rather than the principal's. This problem is particularly relevant in situations where there is considerable uncertainty, such as in financial markets or in the management of large organizations. The other options (B, C, and D) are more specific instances of the principal-agent problem, and not as general.

The Challenge That Arises When One Actor Tasks Another to Carry