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Why biased agencies could be the best monitors

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  • Music, Kasim
  • Salzmann, Christian

Abstract

We analyze the delegation of anti-cheating enforcement to national agencies in a Tullock contest in which competitors expend resources to win a prize. In such a setting, there are two sources of inefficiency. First, monitoring is beneficial to the principal and costly to the agent. The resulting incentive problems and solutions are well described in the literature. However, since cheating is a hidden act, the incentive effect worsens and standard solutions fail to establish an efficient outcome. Second, agencies may prefer a particular outcome of the contest and may prefer their own compatriots to prevail over others, which we label the bias effect. We show that the proper monitoring design can solve both problems and transform the bias effect into intrinsic motivation.

Suggested Citation

  • Music, Kasim & Salzmann, Christian, 2020. "Why biased agencies could be the best monitors," European Journal of Political Economy, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:poleco:v:63:y:2020:i:c:s0176268020300331
    DOI: 10.1016/j.ejpoleco.2020.101885
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    References listed on IDEAS

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