Ranking Contingent Monitoring Systems
This paper seeks to provide a ranking of information systems in a setting of contingent monitoring. Control strategies that make the acquisition of additional information conditional on observing certain outcomes largely elude the existing ranking criteria. We show that this happens because contingent monitoring involves more than the classical trade-off between risk sharing and incentives; it also requires a balancing of incentives and downside risk. We then develop a refinement of the most common information system orderings that conveys this feature. This allows us to reinterpret and generalize some of the literature's key results concerning, for instance, auditing policies with independent or with correlated signals and monitoring systems where the precision of an added signal is endogenous.
Volume (Year): 53 (2007)
Issue (Month): 9 (September)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
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.:
- Son Ku Kim & Yoon S. Suh, 1992. "Conditional Monitoring Policy Under Moral Hazard," Management Science, INFORMS, vol. 38(8), pages 1106-1120, August.
- Kimball, Miles S, 1990.
"Precautionary Saving in the Small and in the Large,"
Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
- Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-32, December.
- Dominique Demougin & Claude Fluet, 1998.
"Ranking of Information Systems in Agency Models: An Integral Condition,"
Cahiers de recherche CREFE / CREFE Working Papers
70, CREFE, Université du Québec à Montréal.
- Claude Fluet & Dominique Demougin, 2001. "Ranking of information systems in agency models: an integral condition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(2), pages 489-496.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999.
"The Economics of Career Concerns, Part I: Comparing Information Structures,"
Review of Economic Studies,
Oxford University Press, vol. 66(1), pages 183-198.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999. "The economics of career concerns: part 1 :comparing information structures," ULB Institutional Repository 2013/9617, ULB -- Universite Libre de Bruxelles.
- Madhav V. Rajan & Bharat Sarath, 1997. "The Value of Correlated Signals in Agencies," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 150-167, Spring.
- Louis Eeckhoudt & Harris Schlesinger, 2005.
"Putting Risk in its Proper Place,"
CESifo Working Paper Series
1462, CESifo Group Munich.
- EECKHOUDT, Louis & SCHLESINGER, Harris, . "Putting risk in its proper place," CORE Discussion Papers RP 1871, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- L. Eeckhoudt & H. Schlesinger, 2006. "Putting risk in its proper place," Post-Print hal-00283170, HAL.
- Ronald A. Dye, 1986. "Optimal Monitoring Policies in Agencies," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 339-350, Autumn.
- Keenan, Donald C & Snow, Arthur, 2002. "Greater Downside Risk Aversion," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 267-77, May.
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:53:y:2007:i:9:p:1501-1509. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.