Principal–agent problem in the context of "Proxy war"

Financial regulation is a broad set of policies that apply to the financial sector in most jurisdictions, justified by two main features of finance: systemic risk, which implies that the failure of financial firms involves public interest considerations; and information asymmetry, which justifies curbs on freedom of contract in selected areas of financial services, particularly those that involve retail clients and/or principal–agent problems. An integral part of financial regulation is the supervision of designated financial firms and markets by specialized authorities such as securities commissions and bank supervisors.

In some jurisdictions, certain aspects of financial supervision are delegated to self-regulatory organizations. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law.

In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian writers John Stuart Mill and Henry Sidgwick.Market failures are often associated with public goods, time-inconsistent preferences, information asymmetries, failures of competition, principal–agent problems, externalities, unequal bargaining power, behavioral irrationality (in behavioral economics), and macro-economic failures (such as unemployment and inflation).

The neoclassical school attributes market failures to the interference of self-regulatory organizations, governments or supra-national institutions in a particular market, although this view is criticized by heterodox economists. Economists, especially microeconomists, are often concerned with the causes of market failure and possible means of correction. Such analysis plays an important role in many types of public policy decisions and studies.

A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory body in order to provide advice.

Relationships between clients and financial advisors can be characterized by principal-agent problems, as financial advisors may possess information and conflicts of interest that lead to dishonest advice and misconduct.

Commissions are a form of variable-pay remuneration for services rendered or products sold. Commissions are a common way to motivate and reward salespeople. Commissions can also be designed to encourage specific sales behaviors. For example, commissions may be reduced when granting large discounts. Or commissions may be increased when selling certain products the organization wants to promote. Commissions are usually implemented within the framework on a sales incentive program, which can include one or multiple commission plans (each typically based on a combination of territory, position, or products).

Payments are often calculated using a percentage of revenue, a way for firms to solve the principal–agent problem by attempting to realign employees' interests with those of the firm. However, models other than percentages are possible, such as profit-based approaches, or bonus-based approaches. Commissions allow sales personnel to be paid (in part or entirely) based on products or services sold, rather than just hourly or based on attempted sales. Although many types of commission systems exist, a common methodology to manage total spend is known as on-target earnings. On-target earnings represent a salesperson's base pay, plus expected commissions (assuming the salesperson meets a quota). On-target earnings help salespersons estimate their expected total compensation, should they meet company-specified goals.

A performance appraisal (also known as a performance review, performance evaluation, career development discussion, or employee appraisal), is a periodic process where the job performance of an employee is documented and evaluated.

Performance appraisals are most often conducted by an employee's immediate manager or line manager. While extensively practiced, annual performance reviews have also been criticized as providing feedback too infrequently to be useful, and some critics argue that performance reviews in general do more harm than good. It is a principal-agent framework that describes the relationship of information between the employer and employee, in particular the direct effect and response received when a performance review is conducted.

Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies. Macroeconomists study aggregate measures of the economy, such as output or gross domestic product (GDP), national income, unemployment, inflation, consumption, saving, investment, or trade. Macroeconomics is primarily focused on questions which help to understand aggregate variables in relation to long run economic growth.

Macroeconomics and microeconomics are the two most general fields in economics. Given macroeconomists focus on large-scale phenomena, or aggregate variables, they differ significantly from microeconomists who study the principle-agent problem at a smaller level of analysis - either firms or consumers. This divide is institutionalized in the field of economics given difference in both methods and outcomes of interest.