City of New York was building a new civic center and had a deadline to get a hug
ID: 1241319 • Letter: C
Question
City of New York was building a new civic center and had a deadline to get a hugh event. They had a contractor doing the work with 60 days to finish. The city's police union was in negotiations with the city and the union wasn't happy with the progress. The union sent a picket line to stop delivery of materials to the worksite. Police officers were supposed to be making sure nothing was held up at the site. What is the principal-agent problem with this? Also, is it a hold up problem for the city or another ;problem?Explanation / Answer
In political science and economics, the principal–agent problem or agency dilemma concerns the difficulties in motivating one party (the "agent"), to act on behalf of another (the "principal"). Union - principal materials ticket - agent no it is not a hold up problem The two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agents are always acting in its (the principals') best interests, particularly when activities that are useful to the principal are costly to the agent, and where elements of what the agent does are costly for the principal to observe. Moral hazard and conflict of interest may arise.