Delegation of Monitoring in a Principal-Agent Relationship
This paper studies a principal-agent relationship in which either the principal or a supervisor can monitor the agent's hidden action by the use of identical monitoring technologies. The author assumes that signals are private information and commitment to monitoring is not possible. He shows that delegation of monitoring is profitable. With delegation the principal can better regulate incentives (incentive effect) and commit to a broader range of wage structures (commitment effect). The author introduces collusion to find an endogenous bound on rewards and shows that collusion limits the commitment effect but, due to the incentive effect, delegation remains profitable. Copyright 1997 by The Review of Economic Studies Limited.
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Volume (Year): 64 (1997)
Issue (Month): 3 (July)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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