Consumers and agency problems

Consumers solve many agency problems, by pointing out when they believe that agelits have made mistakes. I consider the role that consumers play in inducing efficient behaviour by. agents. I distinguish case, where consumers have. similar preferences to the principal from those where they diverge. In the former case, allowing consumer feedback improves allocaticons, and increasing consumer information is unambiguously beneficial. Where consumers disagree with principals over desired outcomers which characterises many public sector benefits,, consumers' feedback about the performance of agemts can reduce wellfare. This may result in efficiently restricting the ability of consumers to complain about agent performance.