The problem arises where the two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agent is always acting in their (the principal's) best interest,[3] particularly when activities that are useful to the principal are costly to the agent, and where elements of what the agent does are costly for the principal to observe (see moral hazard and conflict of interest). Often, the principal may be sufficiently concerned at the possibility of being exploited by the agent that they choose not to enter into the transaction at all, when it would have been mutually beneficial: a suboptimal outcome that can lower welfare overall. The deviation from the principal's interest by the agent is called "agency costs".[3]