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Monitoring Reports with a Self-Interested Inspector

Author

Listed:
  • Gotz, M.
  • Summer, M.

Abstract

If an inspector is work averse and his effort spent on investigating reports is not observable this creates a moral hazard problem whenever there is an imperfect monitoring technology. This problem arises because the organization can not distinguish between an inspection that doesn't find evidence of misrepresented information and an inspection that just hasn't been conducted with due care. We show under what circumstances an organization can overcome this moral hazard problem and when the inspector fulfills his function of deterring falsification of reports.

Suggested Citation

  • Gotz, M. & Summer, M., 1996. "Monitoring Reports with a Self-Interested Inspector," Discussion Papers 96-11, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:96-11
    as

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    More about this item

    Keywords

    GAMES; GAME THEORY; INFORMATION; MORAL HAZARD; LAW;

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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