When actions are unobservable, the principal will write contracts in terms of
A) actions
B) outcomes
C) efforts

Name: When actions are unobservable, the principal will write contracts in terms of A) actions B) outcomes C) efforts
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When actions are unobservable, the principal cannot directly monitor the effort put in by the agent. Hence, the principal must use contracts based on the outcome so that the agent is incentivized to achieve the desired result.

When Actions Are Unobservable, the Principal Will Write Contracts in Terms