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Incentives in Common Agency

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  • Bernard Sinclair-Desgagné

    ()
    (IEA, HEC Montréal)

Abstract

This paper considers situations where an agent must allocate his nonobservable effort among several tasks and where several principals hold diverging viewpoints on what the best allocation should be. Economic theory currently sees each of these features as major obstacles to raising the strength of an agent’s incentives. This paper proposes a simple scheme - based on contingent monitoring - that can nevertheless mitigate both of these obstacles simultaneously. Under this scheme, if the agent’s absolute risk aversion decreases fast enough with respect to wealth, then the principals would coordinate their respective incentive provision so that the agent would also see his various tasks as complementary (instead of substitute) income-enhancing activities. Furthermore, coordination could be achieved in a somewhat “liberal” or decentralized way, in the sense that some principals would need to control only the tasks they have assigned to the agent. Potential applications to corporate compliance, the organization of government, and the management of innovation are briefly discussed.

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Bibliographic Info

Paper provided by HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 01-08.

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Length: 34 pages
Date of creation: Dec 2001
Date of revision:
Handle: RePEc:iea:carech:0108

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Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7
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Keywords: Multitasking; several principals; upper-tail audits.;

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References

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  1. Christoffersen, Peter & Ghysels, Eric & Swanson, Norman R., 2002. "Let's get "real" about using economic data," Journal of Empirical Finance, Elsevier, Elsevier, vol. 9(3), pages 343-360, August.
  2. Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
  3. John M. Maheu & Thomas H. McCurdy, 2001. "Nonlinear Features of Realized FX Volatility," CIRANO Working Papers, CIRANO 2001s-42, CIRANO.
  4. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, Econometric Society, vol. 54(4), pages 923-42, July.
  5. Nathalie de Marcellis-Warin & Erwann Michel-Kerjan, 2001. "The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"," CIRANO Working Papers, CIRANO 2001s-60, CIRANO.
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Cited by:
  1. Trommetter, M., 2008. "Intellectual property rights in agricultural and agro-food biotechnologies to 2030 (© OECD International Futures Programme)," Working Papers, Grenoble Applied Economics Laboratory (GAEL) 200805, Grenoble Applied Economics Laboratory (GAEL).

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