Principal-Agent Problem

When a principal hires an agent to perform tasks, the agent—possessing information advantages and having misaligned personal interests—tends to make decisions that benefit themselves at the principal's expense.

Read the daily articles behind this idea on the Chinese edition.

Related principles

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  Pareto Efficiency
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  Capital Injection & Governance Transition
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  Strategic Capital Allocation as Signal
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  Organizational Coordination Cost Paradox
• → Links
  Opportunity Cost
• → Links
  Tragedy of the Commons
• → Links
  Accounting Reclassification as Strategic Signal
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  Rentier Economy Trap
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  Dilution vs. Control Preservation Tradeoff
• ↗ Extends
  Platform Asymmetry Vulnerability
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  Moral Hazard and Budget Constraints