The principal-agent problem:
A)arises from an imbalance of information.
B)is caused by the principal having imperfect information about the agent.
C)is caused by the principal being unable to perfectly observe the actions of the agent.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

The principal-agent problem arises due to an imbalance of information, where the principal has imperfect information about the agent's actions or intentions, and cannot perfectly observe the agent's actions, leading to potential conflicts of interest.

The Principal-Agent Problem