Topic: Airport Security and the Agent and Principal Problem.

After the September 11 attack, the issue of airport security is, today more than ever, a topic of worldwide concern. Analyze the issue using the analysis of the agent and principal problem.

1. In your opinion, what is the best way to organize airport security? 2. Who should provide security services: the public sector or the private sector? 3. What exactly is the agent/principal problem in the provision of airport security services? 4. Why might a private provider offer better security than a public provider? 5. Do you consider that a private provider would operate at a lower cost than a public one? Why?

Attention: This week's topic is intended to provide you with an opportunity to explore one of the market failures: asymmetric information. Asymmetric information presents challenges. Specifically, the principal-agent problem presents challenges in that organization.