The principal-agent problem arises when one party (the principal) delegates decision-making authority or tasks to another party (the agent) to act on their behalf. However, the interests of the principal and agent may not align perfectly, leading to conflicts of interest and moral hazards. The principal wants the agent to act in their best interest, but the agent may prioritize their own interests or objectives.
When interests don't align, problems arise. The
Principal-Agent Problem explains the conflict between those in control and those executing. 🤝📊
#PrincipalAgentProblem #Incentives #BusinessStrategy #MentalModels #Economics
#AgencyDilemma
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