Agent's Privately Optimal Level of Care
The agent's privately optimal level of care is the amount of effort or precaution that maximizes their own individual net benefit, without consideration for the benefits accruing to the principal. This level is reached when the agent's marginal private benefit from taking care equals their marginal private cost of doing so.
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Economics
Economy
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
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A freelance software developer is hired by a client to build an application. The developer is paid a fixed fee for the project, regardless of the final quality. The developer's extra effort (e.g., more rigorous testing, code optimization) increases the long-term value of the application for the client, but this extra effort is personally costly for the developer in terms of time and energy. Why is the developer likely to choose a level of effort that is less than what would be best for the client and developer combined?
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