Three examples of the agency problem include:
1) Restaurant owner: Head chef (supplier purchasing decisions)
A restaurant owner hires a head chef and trusts them not only to cook well, but also to buy ingredients responsibly within budget. The chef (agent) often chooses suppliers and brands with limited oversight.
An agency problem appears when the chef chooses more expensive suppliers or accepts “favours” (free products, gifts, preferred treatment) in exchange for ordering from them. The owner (principal) pays higher costs, but may not notice immediately because the chef controls information about quality, prices, and kitchen needs.
2) Municipality / public institution: Outsourced service provider (cleaning, security, maintenance)
Many public organisations sign contracts with private providers for services like security guards, cleaning, or facility maintenance. The institution (principal) expects full coverage and quality. The provider (agent) wants to maximize profit.
The agency problem shows up when the provider quietly reduces staff hours, sends less experienced personnel, or uses cheaper materials—things that are hard for the principal to verify daily. On paper the service looks “delivered,” but the real quality is lower. This is a classic case of hidden action and monitoring difficulty.
(Very common in Chile/LatAm public procurement contexts, without needing to accuse any specific entity.)
3) SENCE / training sponsor: OTEC / training provider (attendance, quality, outcomes)
In training programs, the sponsor (principal)—for example a public body or funding organisation—expects the OTEC (agent) to deliver real learning outcomes with proper attendance, evaluations, and evidence. The provider, however, may be incentivised to meet administrative targets (hours delivered, attendance records, completion rates) to secure payments or future contracts.
The agency problem can arise if the provider focuses on “looking compliant” rather than delivering quality—e.g., rushing sessions, using generic materials, or building evidence that meets requirements but doesn’t reflect real learning. The principal struggles to observe true quality because outcomes are harder to measure than paperwork.
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