Individual accountability in teams
AbstractWe consider a model of team production in which the principal observes only the team output, but agents can monitor one another (at a cost) and provide reports to the principal. We consider the problem faced by a principal who is prevented from penalizing an agent without evidence showing that the agent failed to complete his assigned actions. We show the first-best (high effort but no monitoring) can be achieved, but only if the principal assigns second-best actions. The principal requires monitoring, but agents do not monitor, and as long as output is high, the principal does not penalize agents who fail to monitor. If the principal has the responsibility for monitoring, the first-best outcome cannot be achieved, thus we identify an incentive for delegated monitoring even when agents have no informational advantage.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Behavior & Organization.
Volume (Year): 72 (2009)
Issue (Month): 1 (October)
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Web page: http://www.elsevier.com/locate/jebo
Principal-agent problem Delegated monitoring Bilateral contracts;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
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