Which of the following situations is most realistic in principal-agent situations?
A) writing contracts when actions are unobservable
B) taking actions when contracts are unannounced
C) writing contracts when actions are observable

Question

Quizplus · Accepted Answer

In principal-agent situations, actions are often unobservable, making it challenging to write contracts that perfectly align the agent's actions with the principal's interests.

Which of the Following Situations Is Most Realistic in Principal-Agent