Hidden actions ° Agent a person who is performing an act for another person called the principal ● Principal a person for whom another person, called the agent, is performing some act o Moral hazard The tendency of a person who is simperfec tI monitored to gage in dishonest or otherwise undesirable behaviorHidden Actions • Agent – a person who is performing an act for another person called the principal. • Principal – a person for whom another person, called the agent, is performing some act. • Moral hazard – The tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior