Question

What are some examples of the principal-agent problem and asymmetric information in the field of higher education? How can college administrators, faculty, staff be incentivized to carry out an institution’s mission?

Answer 1

Paying donation to get a college admission is such an example -
A) Principal agent problem -
Principal - Students
Agent - Admissions officer/administrators
Here, it would have been beneficial for the principal if, admissions would have been merit based. But the agent disregards that and profits himself/herself and does not help the best interests of the students
B) Information asymmetry -
Students and admission officers have different information when we assume that the trade signifies a student getting admission into a university. While the student thinks that his merit based admission is imminent, the agent is participating in adverse selection on the basis of whoever pays him/her more whereby he/she makes a profit.

At best, there could be referral programs, whereby any faculty/administrator/staff could refer a student/fellow for admission and if the student gets through the process on the basis of merit and sufficient testing, the one who referred the student could be given a healthy annual / monthly bonus. Other than that, the primary role for a college staff remains to be an efficient teacher and mentoring students.