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But Who Will Monitor the Monitor?

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  • David Rahman

Abstract

Suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations. What about the monitor's deviations? To address this question, I propose a contract that makes the monitor responsible for monitoring, and thereby provides incentives even when the monitor's observations are not only private, but costly, too. I also characterize exactly when such a contract can provide monitors with the right incentives to perform. In doing so, I emphasize virtual enforcement and suggest its implications for the theory of repeated games. (JEL C78, D23, D82, D86)

Suggested Citation

  • David Rahman, 2012. "But Who Will Monitor the Monitor?," American Economic Review, American Economic Association, vol. 102(6), pages 2767-2797, October.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:6:p:2767-97
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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