In this paper agency theory has been used to interpret traveller preference heterogeneity in mode choice to understand agency problems. An agency problem is defined as a principal’s dissatisfaction with the outcome of an agent’s performance. Sydney statistical division travellers are considered as the principal and Transport for NSW (TfNSW) is treated as the agent. An agent performs the tasks that are delegated by the principal and thus a metaphoric contract is developed between them and travellers, for instance, show their satisfaction with the reliability and comfort of the transport service. TfNSW is expected to satisfy travellers’ desired services. Therefore, it is imperative to analyse traveller preferences to understand their desires/demands. Random parameter logit models are employed to analyse the travellers’ demand to explore travellers’ dissatisfaction (the agency problem). The analysis reveals that this agency problem exists in the association between traveller and TfNSW because the probability of using a private car for transport is high. The preference for use of private transport is evidence of dissatisfaction of travellers with public transport. This paper identifies the dominant attributes of traveller preferences and then devises an approach to increase the use of public transport and reduce the agency problem.