Too Few Cooks Spoil The Broth
AbstractWe consider a principal-agent relationship in which two tasks need to be carried out. Each task involves a decision. The principal can neither contract on the two decisions nor on the benefit which she receives from them but only on a signal, which simultaneously reflects both. We show that the efficient choice cannot be achieved if the principal employs a single agent. If, however, the principal employs a second agent, she can set a payment scheme such that the efficient choice can be implemented. We also examine when this implementation is vulnerable to collusion.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2004 with number 154.
Date of creation: 17 Sep 2004
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- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- NEP-ALL-2004-08-23 (All new papers)
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