If advertising by an individual firm does not add to total industry sales but merely attracts sales from other firms, If advertising by an individual firm does not add to total industry sales but merely attracts sales from other firms, firms would be better off not to advertise it pays one firm to advertise if the others do not advertising is like a prisoner’s dilemma the worst situation is for every firm to advertise all of the above. Which of the following describes this model well? The principle-agent model can explain non-profit maximization in firms. Which of the following describes this model well? Managers (the agents) act irrationally or with bounded rationality. Shareholders (principles) act irrationally or with bounded rationality. Principles force their managers (agents) to maximize revenue and growth. There is asymmetric information between the shareholders (principles) and managers (agents) in terms of the managers’ actions. None of the above.. which is right?
Answer: The correct answer is None of the Above, as the statement given does not accurately describe the Principle-Agent Model. The Principle-Agent Model explains the conflict of interest that can arise when one party (the principal) delegates work or decision-making