Economics B A-Level
Principal-agent problem
What Principal-agent problem means in Economics B A-Level, as defined for Pearson Edexcel.
Definition of Principal-agent problem
Check what you remember
Read the wording for your board, then hide it and explain Principal-agent problem in your own words. Rough notes are fine. This is a self-check, with no mark or grade.
Reference: Pearson Edexcel
Arises where there is a divorce of ownership from control, leading managers to prioritise their own job security or personal perks over achieving maximum profits for the shareholders.
Topics that use Principal-agent problem
- Business objectives (Pearson Edexcel A-Level)
Related terms
- Market share
- Profit maximisation
- Return on investment (ROI)
- Sales maximisation
- Survival
- Cost efficiency
- Satisficing
Using Principal-agent problem in the exam
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