A restaurant owner hires a waiter to serve food to customers and clear the tables. The owner wants the waiter to be prompt in bringing out the food and clearing the table once the guests are finished with their meal. The waiter is paid a salary and cannot accept tips. The waiter would prefer to check their Facebook account and take their time waiting the tables. If the waiter does spend considerable time checking their Facebook while the owner is not at the restaurant, which of the following is true?

Question

Quizplus · Accepted Answer

The situation described here is an example of the principal-agent problem, where the owner is the principal and the waiter is the agent. The waiter is not acting in the best interest of the owner, who is paying them a salary to provide a service to customers. By spending considerable time checking their Facebook, the waiter is failing to meet the owner's expectations for prompt service.

A Restaurant Owner Hires a Waiter to Serve Food to Customers