Whenever one side of an economic relationship can take a relevant action that the other side cannot observe,the situation is described as one of _____

Question

Quizplus · Accepted Answer

This is a classic case of the principal-agent problem, where the agent (the side with hidden actions) has an incentive to act in a way that is not aligned with the principal's (the side without knowledge of the hidden actions) interests. This can result in adverse selection, moral hazard or rent-seeking behaviors.

Whenever One Side of an Economic Relationship Can Take a Relevant