The principal-agent relationship is a scenario in which one party, known as the principal, delegates decision-making authority to another party, called the agent, to act on their behalf. This relationship is essential in various contexts, as it helps clarify roles and responsibilities when the principal relies on the expertise of the agent to make informed decisions or manage resources effectively. Trust and alignment of interests between both parties are crucial for the success of this relationship, especially when it comes to ensuring that the agent acts in the best interest of the principal.
congrats on reading the definition of Principal-Agent Relationship. now let's actually learn it.