In the situations in Question 1, identify the hidden actions and the hidden characteristic(s).

Question 1

In each of the following cases, who is the principal and who is the agent, and explain why there might be asymmetry of information.

a. A suspicious wife hires a private detective to report on the movements of her husband.

b. A car leasing company providing a holidaymaker with a rental vehicle.

c. A homeowner seeking insurance for her home against flooding.

d. An individual making a routine visit to the dentist for a check-up.