Incentive problems can be overcome, then it is in the interest of all parties to develop efficient solutions to agency problems. Through ______ , there will be more wealth to be shared among contracting parties.
A) adverse selection
B) value maximization
C) contracting until marginal benefit (MB) equals zero
D) asymmetric information

Question

Quizplus · Accepted Answer

Value maximization is the process of creating as much value as possible for all parties involved in a transaction. By finding mutually beneficial solutions, all parties stand to gain more wealth. Adverse selection and asymmetric information are examples of agency problems that can make it difficult to achieve value maximization. Contracting until marginal benefit equals zero is a principle of economics that can guide decision-making but is not directly related to agency problems or the creation of value.

Incentive Problems Can Be Overcome, Then It Is in the Interest