Final answer:
The principal-agent problem arises from conflicts of interest and actions driven by self-interest that can harm all parties involved. This problem is a form of collective action dilemma where disputes over priorities or details and incentives misaligned with group interests lead to suboptimal outcomes.
Step-by-step explanation:
The principal-agent problem primarily arises because there is a conflict of interest between the principal (those who delegate authority) and agents (those who exercise authority). This disconnect often leads to situations where agents may pursue actions that are not in the best interests of the principals. The crux of the issue is that agents, acting rationally in pursuit of their own interests, may make decisions that are detrimental to the principals. This can lead to outcomes such as in the prisoner's dilemma, where despite a common goal to avoid negative repercussions, individuals choose to act in self-interest, resulting in a suboptimal outcome for all parties involved.
Factors contributing to the principal-agent problem include differing priorities between the parties, as well as situations where agreement exists in principle but diverges on details. Moreover, individuals may face incentives that run counter to the collective's best interest, giving rise to collective action problems that are challenging to resolve effectively.
In the realm of politics and organizations, overcoming these collective dilemmas requires careful negotiation and incentivization to ensure that individual actions contribute towards common goals, rather than undermine them.