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Answer to Question #112403 in Microeconomics for Affan Javed
Question #112403
What is the problem of Principal – Agent? How the problem of principal-agent be resolved,
elaborate in the light of Agency Cost Theory?
elaborate in the light of Agency Cost Theory?
Expert's answer
The principal-agent problem is a conflict in priorities between a person or group and the representative authorized to act on their behalf.
The problem can be resolved by changing the system of rewards in order to align priorities or improving flow of information or or both.
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