Problem:
Suppose you hire a real estate agent and tell him to sell your house to the highest bidder. You pay the real estate agent a flat fee of $50,000 when the house is sold. You learn that, unfortunately, the agent sells the house to the first bidder at a low price.
Required:
Question 1: What is this type of problem called?
Question 2: What is one way to change the real estate agent's incentive so he does sell to the highest bidder, instead of the first one?
Note: Show all workings.