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Monitoring with No Moral Hazard: The Case of Small Vessel Commercial Fishing

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  • Orn B. Bodvarsson

Abstract

This paper examines the role of the skipper as a monitor of crew members on fishing boats. In contrast to the usual (principal-agent) approach, there is no moral hazard. Each worker's output is variable and average performance is not known. A monitor is hired to estimate average performance. A theory and test of share differentials between monitors and workers is developed. Monitoring is treated as a sequential sampling experiment. Share differentials depend on worker-specific output variability, size of labor force, and average team output. Empirical results using Oregon fishing data offer strong support for the model.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume13/V13N4P421_434.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 13 (1987)
Issue (Month): 4 (Oct-Dec)
Pages: 421-434

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Handle: RePEc:eej:eeconj:v:13:y:1987:i:4:p:421-434

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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  1. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-67, June.
  2. Stiglitz, Joseph E, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 219-55, April.
  3. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  4. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  5. Cheung, Steven N S, 1969. "Transaction Costs, Risk Aversion, and the Choice of Contractual Arrangements," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 23-42, April.
  6. MacDonald, Glenn M, 1982. "A Market Equilibrium Theory of Job Assignment and Sequential Accumulation of Information," American Economic Review, American Economic Association, vol. 72(5), pages 1038-55, December.
  7. Lucas, Robert E B, 1979. "Sharing, Monitoring, and Incentives: Marshallian Misallocation Reassessed," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 501-21, June.
  8. Sutinen, J G, 1979. "Fishermen's Remuneration Systems and Implications for Fisheries Development," Scottish Journal of Political Economy, Scottish Economic Society, vol. 26(2), pages 147-62, June.
  9. Joesph E. Stiglitz, 1975. "Incentives, Risk, and Information: Notes Towards a Theory of Hierarchy," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 552-579, Autumn.
  10. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Two-Tier Labor Markets in Agrarian Economies," American Economic Review, American Economic Association, vol. 75(1), pages 162-77, March.
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Cited by:
  1. Benito Arruñada & Manuel González, 1997. "How competition controls team production: The case of fishing firms," Economics Working Papers 261, Department of Economics and Business, Universitat Pompeu Fabra.

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