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The principal–agent problem typically arises where the two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agent is always acting in the principal's best interest, particularly when activities that are useful to the principal are costly to ...
The multiple principal problem, also known as the common agency problem, the multiple accountabilities problem, or the problem of serving two masters, is an extension of the principal-agent problem that explains problems that can occur when one person or entity acts on behalf of multiple other persons or entities. [1]
In microeconomics and contract theory, the first-order approach is a simplifying assumption used to solve models with a principal-agent problem. [1] It suggests that, instead of following the usual assumption that the agent will take an action that is utility-maximizing, the modeller use a weaker constraint, and looks only for actions which satisfy the first-order conditions of the agent's ...
The relationship between a company's shareholder and the board of directors is generally considered to be a classic example of a principal–agent problem.The problem arises because there is a division between the ownership and control of the company, [10] as a result of the residual loss.
The alignment problem has many parallels with the principal-agent problem in organizational economics. [149] In a principal-agent problem, a principal, e.g. a firm, hires an agent to perform some task. In the context of AI safety, a human would typically take the principal role and the AI would take the agent role.
Problems occur due to an asymmetric distribution of information which favours the agent. The latter enables the agent to pursue its own interest and engage in opportunistic behaviour – shirking - at the cost of the principal's interest. [13] The principal's problem is how to control and limit shirking by the agent.
It is required to perform all tasks by assigning exactly one agent to each task in such a way that the maximum cost among the individual assignments is minimized. The term "bottleneck" is explained by a common type of application of the problem, where the cost is the duration of the task performed by an agent. In this setting the "maximum cost ...
In mathematics, specifically ring theory, a principal ideal is an ideal in a ring that is generated by a single element of through multiplication by every element of . The term also has another, similar meaning in order theory, where it refers to an (order) ideal in a poset generated by a single element , which is to say the set of all elements less than or equal to in .