The principal-agent problem is:
A) the disconnect between what an elected leader directs and what bureaucrats do
B) a new challenge brought about by the elimination of middle management in bureaucracies
C) easily solved through modern communications technology
D) all of the above

Question

Quizplus · Accepted Answer

The principal-agent problem refers to the challenges that arise when a principal (such as an elected leader) delegates tasks to an agent (such as bureaucrats), and the agent's actions may not align with the principal's interests. This is due to differences in information, goals, or risk preferences between the principal and the agent.

The Principal-Agent Problem Is