the manager-worker principal-agent problem.
When we introduced the principal-agent problem. the owner of the firm was viewed as having different objectives from the manager. There is nothing special about the owner-manager relationship that gives rise to the principal-agent problem:indeed.there is a similar problem between the manager and the employees she or he supervises.
To see this. suppose the manager is being paid a fraction of profits and thus has an incentive to increase the the firm's profits. The manager cannot be in several places at the same time and thus cannot monitor every worker even if he or she wanted to The workers,on the other hand,would just as soon gossip and drink coffee as work.How can the manager(the principal) induce the workers(the agents) not to shirk?