If a principle is reducing agency costs by gathering information about the agent's actions,he is most likely trying to solve the problem

Question

​If a principle is reducing agency costs by gathering information about the agent's actions,he is most likely trying to solve the problem

Quizplus · Accepted Answer

Gathering information about the agent's actions is a common way to mitigate moral hazard, where the agent may take actions that are not in the best interest of the principal. Adverse selection, on the other hand, refers to situations where an asymmetric information problem causes the selection of suboptimal agents, and gathering information about the agent's actions would not solve this problem.

​If a Principle Is Reducing Agency Costs by Gathering Information

If a Principle Is Reducing Agency Costs by Gathering Information