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All-or-Nothing Monitoring

Author

Listed:
  • Rui R. Zhao

Abstract

A principal can observe both the output and input of an agent who works at a job involving multiple tasks. We provide a simple theory that explains why it may be optimal for the principal to use only an output-based incentive contract, even though the principal can monitor the agent's actions perfectly in all but one task and knows exactly which action is optimal for each task. (JEL D82, D86, M54)

Suggested Citation

  • Rui R. Zhao, 2008. "All-or-Nothing Monitoring," American Economic Review, American Economic Association, vol. 98(4), pages 1619-1628, September.
  • Handle: RePEc:aea:aecrev:v:98:y:2008:i:4:p:1619-28
    Note: DOI: 10.1257/aer.98.4.1619
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.4.1619
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    References listed on IDEAS

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    1. repec:wsi:afexxx:v:07:y:2012:i:01:n:s2010495212500030 is not listed on IDEAS
    2. Chen, Bo, 2012. "All-or-nothing payments," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 133-142.
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    Citations

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    Cited by:

    1. Felipe Balmaceda, 2012. "On the Optimality of One-size-fits-all Contracts: The Limited Liability Case," Documentos de Trabajo 291, Centro de Economía Aplicada, Universidad de Chile.
    2. Christian Espinosa & Juan Gorigoitía & Carlos Maquieira, 2012. "Nonlinear behaviour of EMBI index:the case of eastern European countries," Working Papers 37, Facultad de Economía y Empresa, Universidad Diego Portales.
    3. Balmaceda, Felipe, 2016. "Optimal task assignments," Games and Economic Behavior, Elsevier, vol. 98(C), pages 1-18.
    4. Dunia López-Pintado & Juan D. Moreno-Ternero, 2011. "On the optimal management of teams under budget constraints," Working Papers 11.11, Universidad Pablo de Olavide, Department of Economics.
    5. repec:bla:jfinan:v:72:y:2017:i:3:p:1253-1284 is not listed on IDEAS
    6. Gregory Phelan, 2017. "Correlated Default and Financial Intermediation," Journal of Finance, American Finance Association, vol. 72(3), pages 1253-1284, June.
    7. Ben White & Rohan Sadler, 2012. "Optimal conservation investment for a biodiversity‐rich agricultural landscape," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(1), pages 1-21, January.
    8. Fich, Eliezer M. & Starks, Laura T. & Yore, Adam S., 2014. "CEO deal-making activities and compensation," Journal of Financial Economics, Elsevier, vol. 114(3), pages 471-492.
    9. Tigran Melkonyan & Michael H. Taylor, 2013. "Regulatory Policy Design for Agroecosystem Management on Public Rangelands," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 606-627.
    10. Chen Liang & Yili Hong & Bin Gu, 2017. "Home Bias in Global Employment," Working Papers 17-06, NET Institute.
    11. Chen Liang & Yili Hong & Bin Gu, 2016. "Effects of IT-enabled Monitoring on Labor Contracting in Online Platforms: Evidence from a Natural Experiment," Working Papers 16-01, NET Institute.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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