Imagine a situation in which there is a president who prefers less environmental regulation of business. She orders the EPA to ease up on its enforcement of existing environmental rules. Because the people who work for the EPA tend to favor environmental regulation, they ignore the president's orders as much as they can get away with. This is an example of which concept?

Question

Business

Liliana Contreras

20 January, 05:54

Imagine a situation in which there is a president who prefers less environmental regulation of business. She orders the EPA to ease up on its enforcement of existing environmental rules. Because the people who work for the EPA tend to favor environmental regulation, they ignore the president's orders as much as they can get away with. This is an example of which concept?

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Answers (2)

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Katelynn Jacobson · Answer 1

The answer is Principal Agent Game Theory.

Explanation:

This concept is characterized by

A principal hires an agent to complete some task the agent is unable or unwilling to do. A leader is an agent to the citizens (or principals) of a country. Principals must be worried that agents will do what the agents want to do and not what the principals hired the agents to do. This is especially concerning when the two sides have unaligned preferences like in the question above There is no effective monitoring, and future incentives are unavailable. Leaders might instigate wars when it is convenient for them even though those wars are bad for the country.

Billy Booker · Answer 2

A principal-agent game.

Explanation:

The principal-agent problem is a conflict in priorities between the owner of an asset and the person to whom control of the asset has been delegated.

The problem can occur in many situations, from the relationship between a client and a lawyer to the relationship between stockholders and a CEO.

Resolving a principal-agent problem may require changing the system of rewards in order to align priorities or improving the flow of information or both