How Can a Principal Manage the Risk That an Agent

question 6

Essay

How can a principal manage the risk that an agent will commit the principal to contracts that it does not want to be bound by?

---

Definitions:

Equilibrium Price

The price point at which the amount of products offered matches the amount of products consumers want to buy.

Quantity Supplied

The level of a commodity or service that sellers are eager and qualified to sell at a set price over a designated period.

Market Equilibrium

The state in which market supply equals market demand, resulting in stable prices where producers and consumers agree.

Equilibrium Price

The price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.