IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v17y2012i2d10.1007_s11142-011-9175-2.html
   My bibliography  Save this article

Information suppression in multi-agent contracting

Author

Listed:
  • Gerald A. Feltham

    (University of British Columbia)

  • Christian Hofmann

    (LMU Munich)

Abstract

This paper examines the principal’s preferences over reporting systems in multi-agent settings. In multi-agent settings, the principal’s contract offer depends on the credibility of the agents’ commitment not to collude on the terms of the contract. If the agents can credibly rule out collusion, then the principal prefers that the agents observe all performance measures and she prefers an accounting system that releases detailed instead of aggregated information. To the contrary, when the principal cannot preclude the agents from writing side contracts, it can be efficient to suppress certain information signals for contracting purposes. Specifically, restricting the information dissemination within organizations or releasing aggregated instead of detailed information are two efficient avenues to suppress information.

Suggested Citation

  • Gerald A. Feltham & Christian Hofmann, 2012. "Information suppression in multi-agent contracting," Review of Accounting Studies, Springer, vol. 17(2), pages 254-278, June.
    • Handle: RePEc:spr:reaccs:v:17:y:2012:i:2:d:10.1007_s11142-011-9175-2
    DOI: 10.1007/s11142-011-9175-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-011-9175-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-011-9175-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Ziv, A, 2000. "Information technology and optimal firm structure," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 38(2), pages 297-328.
    2. Villadsen, Bente, 1995. "Communication and delegation in collusive agencies," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 315-344, April.
    3. repec:bla:scandj:v:99:y:1997:i:4:p:555-79 is not listed on IDEAS
    4. Demski, Joel S, et al, 1999. "Practices for Managing Information Flows within Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 107-131, April.
    5. Gigler, Frank & Hemmer, Thomas, 2002. "Informational costs and benefits of creating separately identifiable operating segments," Journal of Accounting and Economics, Elsevier, vol. 33(1), pages 69-90, February.
    6. David Martimort, 1997. "A Theory of Bureaucratization Based on Reciprocity and Collusive Behavior," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 555-579, December.
    7. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
    8. Ramakrishnan, Ram T S & Thakor, Anjan V, 1991. "Cooperation versus Competition in Agency," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 248-283, Fall.
    9. Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 433-446.
    10. Ishiguro, Shingo, 2004. "Collusion and discrimination in organizations," Journal of Economic Theory, Elsevier, vol. 116(2), pages 357-369, June.
    11. Marschak, Thomas & Reichelstein, Stefan, 1998. "Network Mechanisms, Informational Efficiency, and Hierarchies," Journal of Economic Theory, Elsevier, vol. 79(1), pages 106-141, March.
    12. Indjejikian, Raffi & Nanda, Dhananjay, 1999. "Dynamic incentives and responsibility accounting," Journal of Accounting and Economics, Elsevier, vol. 27(2), pages 177-201, April.
    13. Dilip Mookherjee, 2006. "Decentralization, Hierarchies, and Incentives: A Mechanism Design Perspective," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 367-390, June.
    14. Tim Baldenius & Nahum D. Melumad & Amir Ziv, 2002. "Monitoring in Multiagent Organizations," Contemporary Accounting Research, John Wiley & Sons, vol. 19(4), pages 483-511, December.
    15. Geanakoplos, John & Milgrom, Paul, 1991. "A theory of hierarchies based on limited managerial attention," Journal of the Japanese and International Economies, Elsevier, vol. 5(3), pages 205-225, September.
    16. Gerald A. Feltham & Christian Hofmann, 2007. "Limited Commitment in Multi†agent Contracting," Contemporary Accounting Research, John Wiley & Sons, vol. 24(2), pages 345-375, June.
    17. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 321-345, April.
    18. Aggarwal, Raj & Simkins, Betty J., 2001. "Open book management--optimizing human capital," Business Horizons, Elsevier, vol. 44(5), pages 5-13.
    19. Jean‐Jacques Laffont & David Martimort, 1997. "The Firm as a Multicontract Organization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(2), pages 201-234, June.
    20. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer.
    21. Huddart, Steven & Liang, Pierre Jinghong, 2005. "Profit sharing and monitoring in partnerships," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 153-187, December.
    22. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
    23. Anil Arya & Jonathan Glover & Brian Mittendorf, 2006. "Hierarchical reporting, aggregation, and information cascades," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 355-362.
    24. Anil Arya & Jonathan Glover & Pierre Jinghong Liang, 2004. "Intertemporal aggregation and incentives," European Accounting Review, Taylor & Francis Journals, vol. 13(4), pages 643-657.
    25. John Christensen, 1981. "Communication in Agencies," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 661-674, Autumn.
    26. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    27. Madhav V. Rajan & Stefan Reichelstein, 2006. "Subjective Performance Indicators and Discretionary Bonus Pools," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 44(3), pages 585-618, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gerald A. Feltham & Christian Hofmann, 2007. "Limited Commitment in Multi†agent Contracting," Contemporary Accounting Research, John Wiley & Sons, vol. 24(2), pages 345-375, June.
    2. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    3. Pierre Fleckinger & David Martimort & Nicolas Roux, 2024. "Should They Compete or Should They Cooperate? The View of Agency Theory," Journal of Economic Literature, American Economic Association, vol. 62(4), pages 1589-1646, December.
    4. Jaesoo Kim & Dongsoo Shin, 2023. "Vertical Relationships with Hidden Interactions," Games, MDPI, vol. 14(6), pages 1-21, October.
    5. Esther Gal‐Or, 1997. "Multiprincipal Agency Relationships as Implied by Product Market Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 235-256, June.
    6. Ola Kvaløy & Trond E. Olsen, 2019. "Relational Contracts, Multiple Agents, and Correlated Outputs," Management Science, INFORMS, vol. 65(11), pages 5360-5370, November.
    7. Alice Peng-Ju Su, 2019. "Team incentives with imperfect mutual inference," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(2), pages 687-712, June.
    8. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
    9. Kvaløy, Ola & Olsen, Trond E., 2016. "Teams in Relational Contracts," Discussion Papers 2016/23, Norwegian School of Economics, Department of Business and Management Science.
    10. Anil Arya & Brian Mittendorf, 2011. "The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns," Management Science, INFORMS, vol. 57(8), pages 1424-1437, August.
    11. Banerjee, Swapnendu & Chakraborty, Somenath, 2025. "Individual versus Team Production with Social Preferences," MPRA Paper 125933, University Library of Munich, Germany.
    12. Frank B. Gigler & Thomas Hemmer, 2004. "On the Value of Transparency in Agencies with Renegotiation," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 42(5), pages 871-893, December.
    13. Martimort, David & Pouyet, Jerome, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 393-411, March.
    14. Dongsoo Shin, 2007. "Contracts under Wage Compression: A Case of Beneficial Collusion," Southern Economic Journal, John Wiley & Sons, vol. 74(1), pages 143-157, July.
    15. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    16. Fleckinger, Pierre, 2012. "Correlation and relative performance evaluation," Journal of Economic Theory, Elsevier, vol. 147(1), pages 93-117.
    17. Antoine Faure-Grimaud & Jean-Jacques Laffont & David Martimort, 2000. "A Theory of Supervision with Endogenous Transaction Costs," Annals of Economics and Finance, Society for AEF, vol. 1(2), pages 231-263, November.
    18. Dam, Kaniṣka & Roy Chowdhury, Prabal, 2021. "Monitoring and incentives under multiple-bank lending: The role of collusive threats," Journal of Economic Theory, Elsevier, vol. 197(C).
    19. Che, Xiaogang & Huang, Yangguang & Zhang, Le, 2021. "Supervisory efficiency and collusion in a multiple-agent hierarchy," Games and Economic Behavior, Elsevier, vol. 130(C), pages 425-442.
    20. Meyer, Margaret A., 1995. "Cooperation and competition in organizations: A dynamic perspective," European Economic Review, Elsevier, vol. 39(3-4), pages 709-722, April.
    21. Lambert, Richard A., 2001. "Contracting theory and accounting," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 3-87, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:17:y:2012:i:2:d:10.1007_s11142-011-9175-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.