You feel sick and you decide to take some days off work during which, you follow...

You feel sick and you decide to take some days off work during which, you follow the advice of your grandma who recommended you to drink warm beverages and chicken soup. A week later, you still do not feel better and you finally decide to visit a doctor.

A. In this scenario, who is the principal? Who is the agent? Explain in details your answer.

B. Could there be a Principal-Agent problem between a doctor and her/his patient? Explain in details your answer.

Solutions

Expert Solution

A. In this situation i am the agent and my grandma is principal.The principal agent problem when one person is allowed to take decision (agent) on be half of the another peroson (Princiapl). In this situation issues of moral hazards and conflicts of interest arises.

As with the instruction of grandma who is the principal here iam following her instruction regarding my health as i am agent or carrier of her instructions. In this situation when there is no significant improvement takes place conflicts arises.

B. There could be a problem of agent principal may arise when i do not follow the instructions of doctor .Being an agent of doctor now i have to carry his instructions as he is the principal of instructions. IN this picture confliscts may arise when simultaniously an agent follows two instructions from two differnt principals.Here i should be the link between doctor and my grandma to provide all instructions passed on by doctor as a principal

Rahul Sunny answered 1 week ago

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