Principal-Agent Problem
The Principal-Agent Problem arises when one party (the agent) acts on behalf of another (the principal) but has different interests, information, and incentives. The principal can't perfectly observe the agent's actions or effort, creating opportunities for the agent to act in their own interest rather than the principal's. Central to economics, law, and management, it explains why managers may not act in shareholders' interests, why doctors may over-prescribe, and why employees may shirk.