The
principal–agent problem (also known as
agency dilemma or theory of agency) occurs when one person or entity (the "
agent") is able to make decisions on behalf of, or that impact, another person or entity: the "
principal". The dilemma exists because sometimes the agent is motivated to act in his own best interests rather than those of the principal. The agent-principal relationship is a useful analytic tool in
political science and
economics, but may also apply to other areas.