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Unformatted text preview: o maximize the principal’s utility • Agent may act in his or her own best interest o maximize his or her own utility. • The agent can do this without the principal knowing because of information asymmetry o the agent knows something that the principal does not o the agent has access to information that the principal does not have o the agent is able to do so without the principal knowing. Example: Car Purchaser= principal Car Salesman= agent The car salesman works for a commission and would like for you to purchase the highest priced car as possible so they will try to add as many additional prices for features as possible....
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This note was uploaded on 12/23/2013 for the course FIN 453 taught by Professor Daniellewinchester during the Fall '10 term at N.C. A&T.
- Fall '10