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The Principal-Agent Problem
Four Scenarios
The hit TV comedy series 'Little Britain' features a character called Carol Beer, who works in a travel agency. Carol's stock line to most requests from customers is, 'Computer says no'. It makes little difference how flexible the customer seems to be in amending their itinerary or requirements - the computer always seems to come back with the same answer.
Why does the computer always say 'no'? What does the computer operator know that you don't? Copyright: Rajesh Sundaram, from stock.xchng.
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Recently, I was waiting for a train on the London Underground system. An electronic information board revealed that a Central Line train to Epping would be along in six minutes. Three minutes later, the board changed to reveal that the train would be five minutes. Two minutes after this, the board flashed up the message that the train would be six minutes. This to-ing and fro-ing continued for another five minutes until at last the countdown seemed to return to a more chronologically acceptable series of steps. Eventually, the train arrived 18 minutes after I had arrived on the platform.
Information - very useful, providing it is accurate. If it isn't, how valuable is it? Copyright: Biz/ed team.
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You go to a doctor complaining of stomach pains. The doctor carries out a series of tests - blood pressure, pulse, heartbeat - then feels your stomach and asks you a variety of questions about the symptoms and your lifestyle. At the end of the examination, the doctor reveals that it is likely you have a case of gastroenteritis. The pains could have been linked to all manner of other types of abdominal problem - gallstones, indigestion, appendicitis, bowel obstruction, hernia, kidney stones and so on. However, you have to trust the doctor that what s/he says is the cause of the problem and that the treatment you are offered is the right treatment.
Can you trust your doctor? Copyright: Sanja Gjenero, from stock.xchng.
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You decide that you really do need to get up to date with the digital revolution and trade in the old TV that has served you so well for the past 15 years. Problem is, what do you buy? One friend told you that she swears by Sony; another wouldn't give Sony the time of day - Panasonic is what you need. Another says it has to be Samsung and yet another will only ever buy Sharp. You check out the information further - entering 'Digital TV' into Amazon brings up over 900 results! Ever more confused, you decide to go to the experts and visit your local Curry's store. The member of the sales team talks to you about the range they have available and where you should be looking. She recommends a Toshiba. Who should you believe?
A new plasma TV - which company makes the best one? Copyright: Leo Cinezi, from stock.xchng.
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