Principal-Agent Problem in Economics: Definition & Examples


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question 1 of 3

Who are the two players in a principal-agent problem?

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1. Who sometimes ignores the best interest of the principal during a principal-agent problem?

2. Who hires an agent?

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About This Quiz & Worksheet

In many business or legal situations, there is a principal and an agent. This quiz tests your understanding of these parties as well as quizzing your understanding with real-life situations.

Quiz & Worksheet Goals

This assessment gauges your understanding of:

  • The parties involved in this problem
  • The characteristics of agents and principals
  • How to determine which party is the agent

Skills Practiced

  • Reading comprehension - ensure that you draw the most important information related to the principal-agent problem
  • Information recall - access the knowledge you've gained regarding the parties involved in this problem
  • Knowledge application - use your knowledge to decide which entity represents the principal and which is the agent in realistic scenarios

Additional Learning

For more information regarding the principal-agent problem, review the accompanying article titled Principal-Agent Problem in Economics: Definition & Examples. This article details:

  • The definition of principal
  • The definition of agent
  • Conflicting interests between the two roles