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Information Structures and the Delegation of Monitoring

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  • Pau OLIVELLA

Abstract

If the owner of a firm cannot commit ex-ante to monitor his workers and the monitoring technology may accuse a diligent worker of shirking (produce a “false positive”), the lack of commitment problem is extremely severe : the worker may shirk even if monitoring is costless. However, the same presence of false positives is necessary for this commitment problem to be fully resolved either through delegation of monitoring or through contracting with a passive third party.

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Bibliographic Info

Article provided by ENSAE in its journal Annals of Economics and Statistics.

Volume (Year): (1995)
Issue (Month): 39 ()
Pages: 1-32

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Handle: RePEc:adr:anecst:y:1995:i:39:p:01

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  1. Watts, Ross L & Zimmerman, Jerold L, 1983. "Agency Problems, Auditing, and the Theory of the Firm: Some Evidence," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 26(3), pages 613-33, October.
  2. Singh, Nirvikar, 1985. "Monitoring and Hierarchies: The Marginal Value of Information in a Principal-Agent Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(3), pages 599-609, June.
  3. Sparks, Roger, 1986. "A Model of Involuntary Unemployment and Wage Rigidity: Worker Incentives and the Threat of Dismissal," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(4), pages 560-81, October.
  4. Pau OLIVELLA, 1995. "Information Structures and the Delegation of Monitoring," Annales d'Economie et de Statistique, ENSAE, ENSAE, issue 39, pages 1-32.
  5. Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Demski, Joel S. & Sappington, David, 1984. "Optimal incentive contracts with multiple agents," Journal of Economic Theory, Elsevier, Elsevier, vol. 33(1), pages 152-171, June.
  8. Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, Elsevier, vol. 1(4), pages 295-326, December.
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Cited by:
  1. Olivella, P. & Aron, D.J., 1991. "Bonuses and Penalties as Equilibrium Incentive Devices, with Application to Manufacturing Systems," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 153.91, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Pau OLIVELLA, 1995. "Information Structures and the Delegation of Monitoring," Annales d'Economie et de Statistique, ENSAE, ENSAE, issue 39, pages 1-32.

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