In the principal-agent model,the shock ______ verifiable ex post and the agent's effort ______ verifiable ex post.

Question

Quizplus · Accepted Answer

In the principal-agent model, the shock is not verifiable ex post because it is an unobservable event that affects the outcome. Similarly, the agent's effort is also not verifiable ex post because it is also an unobservable variable. Therefore, the correct option is D, which states that both the shock and the agent's effort are not verifiable ex post.

In the Principal-Agent Model,the Shock ______ Verifiable Ex Post and the Agent's