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Explain what is meant by the term principal-agent problem

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a) Explain what is meant by the term principal-agent problem. Give an example of a setting where this problem has arisen. Do you think that increased monitoring would have eliminated the problem? Why don't firms simply hire more supervisors to eliminate shirking problems?;b) Speculate on what actions workers might take to resolve a free-rider problem arising from a profit-sharing problem.;c) What are stock options? How do they relate to the principal-agent problem?

 

Paper#28012 | Written in 18-Jul-2015

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