But Who Will Monitor the Monitor?
AbstractSuppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations. What about the monitor's deviations? To address this question, I propose a contract that makes the monitor responsible for monitoring, and thereby provides incentives even when the monitor's observations are not only private, but costly, too. I also characterize exactly when such a contract can provide monitors with the right incentives to perform. In doing so, I emphasize virtual enforcement and suggest its implications for the theory of repeated games. (JEL C78, D23, D82, D86)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 102 (2012)
Issue (Month): 6 (October)
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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- Matthias Lang, 2012. "Communicating Subjective Evaluations," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_14, Max Planck Institute for Research on Collective Goods, revised Aug 2013.
- David A. Miller & Kareen Rozen, 2011. "We study optimal contracting in team settings, featuring stylized aspects of production environments with complex tasks. Agents have many opportunities to shirk, task-level monitoring is needed to pro," Cowles Foundation Discussion Papers 1823, Cowles Foundation for Research in Economics, Yale University, revised Jun 2012.
- Margaret Meyer & Florian Ederer & Richard Holden, 2013.
"Gaming and Strategic Ambiguity in Incentive Provision,"
Economics Series Working Papers
640, University of Oxford, Department of Economics.
- Ederer, Florian & Holden, Richard & Meyer, Margaret A, 2013. "Gaming and Strategic Ambiguity in Incentive Provision," CEPR Discussion Papers 9319, C.E.P.R. Discussion Papers.
- David A. Miller & Kareen Rozen, 2011. "Optimally Empty Promises and Endogenous Supervision," Levine's Working Paper Archive 786969000000000270, David K. Levine.
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