What Role Does Reputation Have in Solving Principal-Agent Problems

question 40

Multiple Choice

What role does reputation have in solving principal-agent problems?

• A) There is no effect of reputation.
• B) Reputations enable principals to pick better agents.
• C) Reputation is the only solution to principal-agent problems.
• D) Reputations enable agents to pick better principals.
• E) Principals pay no attention to the reputation of agents.

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Definitions:

Input Market

Markets where firms purchase resources and services needed for the production process, such as labor, raw materials, and machinery.

Labor Union

An organization of workers formed to protect and further their rights and interests through collective bargaining.

National Labor Relations (Wagner) Act

A 1935 United States federal law that protects the rights of employees to organize, form unions, and engage in collective bargaining, while prohibiting certain unfair labor practices.

Coercion or Interference

Actions or practices that force or unduly influence someone to act in a way that they would not otherwise choose.