Question

An incentive conflict is when a. ​The agent and the principal have identical incentives b. ​The agent has different incentives than does the principal c. ​The agent and the principal neither have any incentives to work hard d. ​None of the above

Answer 1

Answer:

The correct answer is letter "B": The agent has different incentives than does the principal.

Explanation:

Incentive conflicts more often called principal-agent problems arise when a principal (stakeholder) hires an agent (manager) to handle businesses on behalf of the principal but the principal's interest is different from the agent's purpose.  

Agents are paid for following the principal's instructions but in most cases, when it comes to decision-making, the point of view of the agent differs from the position of the principal. The principal's point of view is typically self-biased.