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Communication in Agencies

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  • John Christensen

Abstract

In this article the value of communications structures is considered in an agency model with differential information. The optimal compensation to the agent is characterized, and it is shown that this characterization is related to the accountant's use of the budget as a motivation device. Within our framework, we discuss the relationship between the content of information systems supplied to the agent privately and the agency's well-being. It is shown that the agency is not always better off if the agent is supplied with more information, since he might use that information to shirk.

Suggested Citation

  • John Christensen, 1981. "Communication in Agencies," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 661-674, Autumn.
  • Handle: RePEc:rje:bellje:v:12:y:1981:i:autumn:p:661-674
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    Cited by:

    1. Christian Laux & Volker Laux, 2006. "Performance Measurement and Information Production," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(3), pages 412-423, September.
    2. Melumad, Nahum D. & Reichelstein, Stefan, 1989. "Value of communication in agencies," Journal of Economic Theory, Elsevier, vol. 47(2), pages 334-368, April.
    3. Edward Simpson Prescott & Robert M. Townsend, 2003. "Mechanism design and assignment models," Working Paper 03-09, Federal Reserve Bank of Richmond.
    4. Mukherji, Arijit & Nagarajan, Nandu J., 1995. "Moral hazard and contractibility in investment decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 413-430, May.
    5. Peter Bogetoft, 2000. "DEA and Activity Planning under Asymmetric Information," Journal of Productivity Analysis, Springer, vol. 13(1), pages 7-48, January.
    6. Edward Simpson Prescott, 1997. "The pre-commitment approach in a model of regulatory banking capital," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 23-50.
    7. Nahum D. Melumad & Toshiyuki Shibano, 1991. "Communication in Settings with No. Transfers," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 173-198, Summer.

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