An interesting example of the workings of the principal agent problem perhaps?
To overcome some of what we call the principal agent problem.
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As time went on though, the principal-agent problem manifested itself in each one.
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One of the worst ideas to come out of academia in the last 50 years is the so-called principal-agent problem.
This creates what economists call a principal-agent problem.
That is held to result when the market suffers from inadequate or inaccurate information delivery, inadequate or insufficient competition, principal-agent problems (where agents fail to represent the interests of their principals), and externalities (where market actors fail to bear the costs of their actions or choices), among other problems.
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In terms preferred by economists, a situation defined by a principal-agent problem (such as you hiring a doctor or car mechanic who gets to both define your problem and figure out what to charge you for fixing it) was replaced by a much simpler employment relationship: would-be hustlers found themselves being turned into professional, generalist managers.
The Foreign Agents Registration Act (FARA) requires any agent of a foreign principal - including agents of foreign states, political parties, corporations, non-governmental organizations and even individuals - to register with the U.S. Department of Justice as a foreign agent.
In addition to its legal services, the firm registered as an agent of a foreign principal under the Foreign Agents Registration Act of 1938 (FARA) as well as the Lobbying Disclosure Act of 1995 (LDA) to press the Kuwaiti detainees' cause on Capitol Hill.
We define an agency relationship as a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent.
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If both parties to the relationship are utility maximizers, there is good reason to believe that the agent will not always act in the best interests of the principal.
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The principal can limit divergences from his interest by establishing appropriate incentives for the agent and by incurring monitoring costs designed to limit the aberrant activities of the agent.
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