The principal is distinct from the agent in the principal-agent model because
A)the principal offers the contract to the agent.
B)the principal is fully informed.
C)both a and b.
D)neither a nor b.

Question

Quizplus · Accepted Answer

The principal offers the contract to the agent, which is a key distinction in the principal-agent model. The assumption that the principal is fully informed is not accurate; part of the challenge in these relationships often involves information asymmetry, where the agent may have more information about certain actions or outcomes than the principal.

The Principal Is Distinct from the Agent in the Principal-Agent