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Mutual Monitoring and Best Agency Contracts

Author

Listed:
  • Paul E. Fischer
  • John S. Hughes

Abstract

We consider the design of contracts in a principal-agent setting with two agents where each agent privately observes and reports to the principal a signal regarding the actions taken. We consider two cases: one where the agents observe the same signal and one where the agents observe different signals. For each case we show that, under certain conditions, truthful reporting and desired actions can be implemented at no or nearly no additional compensation cost above that incurred when the agents' signals are contractible public information.

Suggested Citation

  • Paul E. Fischer & John S. Hughes, 1997. "Mutual Monitoring and Best Agency Contracts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(2), pages 334-334, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199706)153:2_334:mmabac_2.0.tx_2-3
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    Cited by:

    1. Masclet, David & Montmarquette, Claude & Viennot-Briot, Nathalie, 2019. "Can whistleblower programs reduce tax evasion? Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 83(C).
    2. Joeri Sol, 2016. "Peer Evaluation: Incentives and Coworker Relations," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 56-76, March.
    3. Joeri Sol, 2010. "Peer Evaluation: Incentives and Co-Worker Relations," Tinbergen Institute Discussion Papers 10-055/1, Tinbergen Institute.
    4. Misty L. Loughry & Henry L. Tosi, 2008. "Performance Implications of Peer Monitoring," Organization Science, INFORMS, vol. 19(6), pages 876-890, December.
    5. Yusheng Kong & Takuriramunashe Famba & Grace Chituku-Dzimiro & Huaping Sun & Ophias Kurauone, 2020. "Corporate Governance Mechanisms, Ownership and Firm Value: Evidence from Listed Chinese Firms," IJFS, MDPI, vol. 8(2), pages 1-26, April.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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