Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 6P
To determine
Asymmetric information and compare hidden characteristics with hidden actions and determine the type of asymmetric information that contributes to the problem of principal-agent.
Concept Introduction: Asymmetric information is lack of information where one party has an advantage over the other and they use it to their economic advantage.
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7 A principal-agent problem can arise when
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b) a principal hires an agent to do something on their behalf, but the principal cannot perfectly observe the agent's actions.
c) a principal uses an agent to accomplish a task the principal wants credit for completing.
d) an insurance agent sells a policy to a buyer who uses it as an incentive to behave badly
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