Asked by Aaron Marquez on Sep 24, 2024
If a principle is reducing agency costs by gathering information about the agent's type,he is most likely trying to solve the problem
A) Adverse selection
B) Moral hazard
C) Both of the above
D) None of the above
Agency Costs
Costs incurred in principal–agent relationships; these costs are associated with moral hazard and adverse selection problems.
- Grasp the concept of adverse selection as a pre-contractual problem.
- Recognize the importance of information gathering in solving agency problems.
Learning Objectives
- Grasp the concept of adverse selection as a pre-contractual problem.
- Recognize the importance of information gathering in solving agency problems.