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A Note on Strategic Sampling in Agencies

Author

Listed:
  • Robert Bushman

    (Graduate School of Business, University of Chicago, Chicago, Illinois 60637)

  • Chandra Kanodia

    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

Abstract

This paper studies sample design for process control in principal-agent settings where deterrence rather than ex post detection is the main issue. We show how the magnitude of gains from additional sampling can be calculated and traded off against sampling costs. It is shown that the optimal sample size shrinks as target rates are lowered.

Suggested Citation

  • Robert Bushman & Chandra Kanodia, 1996. "A Note on Strategic Sampling in Agencies," Management Science, INFORMS, vol. 42(1), pages 151-156, January.
    • Handle: RePEc:inm:ormnsc:v:42:y:1996:i:1:p:151-156
    DOI: 10.1287/mnsc.42.1.151
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    Citations

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    Cited by:

    1. Guillaume Roger, 2016. "A Revelation Mechanism for Soft Information under Moral Hazard," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(5), pages 752-763, October.
    2. Avinadav, Tal & Chernonog, Tatyana & Fruchter, Gila E. & Prasad, Ashutosh, 2020. "Contract design when quality is co-created in a supply chain," European Journal of Operational Research, Elsevier, vol. 286(3), pages 908-918.
    3. Guillaume Roger, 2013. "Optimal Contract under Moral Hazard with Soft Information," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 55-80, November.
    4. Andrew Yim, 2009. "Efficient Committed Budget for Implementing Target Audit Probability for Many Inspectees," Management Science, INFORMS, vol. 55(12), pages 2000-2018, December.
    5. Guillaume Roger, 2013. "Moral Hazard with Discrete Soft Information," The Economic Record, The Economic Society of Australia, vol. 89(287), pages 545-555, December.

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