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