Politicians have more information than voters and may not use that information in the interest of the public. This is:
A) a mutually beneficial trade.
B) moral hazard.
C) adverse selection.
D) the principal-agent problem.

Question

Quizplus · Accepted Answer

The situation described is the principal-agent problem, which occurs when the interests of the principal (the voters) and the agent (the politicians) are not aligned. In this case, the politicians have access to more information which they may use in their own interest, rather than the interest of the voters.

Politicians Have More Information Than Voters and May Not Use