The Delegation Problem Where the Principal Doesn't Have Complete Information

question 22

Multiple Choice

The delegation problem where the principal doesn't have complete information about how the agent is performing is known as:

• A) moral hazard
• B) linkage problem
• C) adverse selection

---

Definitions:

Invalid Offer

An offer that cannot be legally accepted due to its failure to meet certain essential elements or because it involves activities contrary to law.

Counteroffer

An offeree’s response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

Original Offeror

The entity or individual who first makes an offer or proposal in a contract negotiation scenario.

Offer Terminates

The point at which a proposal or invitation to engage in a contract is revoked or becomes invalid.