Private Monitoring, Collusion and the Timing of Information
When a principal’s monitoring information is private (non-verifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent’s wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources—the so-called burning of money. A more realistic and efficient outcome is feasible when the private information arrives in time to rescale the agent’s effort. Rescaling is more effective than pure monetary penalties because effort has different values to different parties while money is equally valuable to all parties. Furthermore, when rescaling is feasible, private monitoring is more efficient than public monitoring subject to collusion because non-monetary penalties are ineffective to deter collusion.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
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.:
- Vianney Dequiedt & David Martimort, 2007.
"Mechanism Design with Private Communication,"
NajEcon Working Paper Reviews
- Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
- William Fuchs, 2005.
"Contracting with Repeated Moral Hazard and Private Evaluations,"
2005 Meeting Papers
431, Society for Economic Dynamics.
- William Fuchs, 2007. "Contracting with Repeated Moral Hazard and Private Evaluations," American Economic Review, American Economic Association, vol. 97(4), pages 1432-1448, September.
- William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," Discussion Papers 04-012, Stanford Institute for Economic Policy Research.
- William Fuchs, 2005. "Contracting with Repeated Moral Hazard and Private Evaluations," Game Theory and Information 0511007, EconWPA.
- Kandori, Michihiro, 2002.
"Introduction to Repeated Games with Private Monitoring,"
Journal of Economic Theory,
Elsevier, vol. 102(1), pages 1-15, January.
- Michihiro Kandori, 2001. "Introduction to Repeated Games with Private Monitoring," CIRJE F-Series CIRJE-F-114, CIRJE, Faculty of Economics, University of Tokyo.
- Faure-Grimaud, Antoine & Martimort, David, 2003. " Regulatory Inertia," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 413-37, Autumn.
- Roland Strausz, 2006.
"Interim Information in Long-Term Contracts,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 15(4), pages 1041-1067, December.
- Strausz, Roland, 2005. "Interim Information in Long Term Contracts," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 40, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Faure-Grimaud, Antoine & Laffont, Jean-Jacques & Martimort, David, 2003.
"Collusion, Delegation and Supervision with Soft Information,"
IDEI Working Papers
167, Institut d'Économie Industrielle (IDEI), Toulouse.
- Antoine Faure-Grimaud & Jean-Jacques Laffont & David Martimort, 2003. "Collusion, Delegation and Supervision with Soft Information," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 253-279.
- Bentley MacLeod, 2001.
"Optimal Contracting with Subjective Evaluation,"
Theory workshop papers
357966000000000036, UCLA Department of Economics.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
- Strausz, R.G., 1995.
"Delegation of Monitoring in a Principal-Agent Relationship,"
1995-60, Tilburg University, Center for Economic Research.
- Roland Strausz, 1997. "Delegation of Monitoring in a Principal-Agent Relationship," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 337-357.
- Celik, Gorkem, 2004.
"Mechanism Design with Collusive Supervision,"
Microeconomics.ca working papers
celik-04-09-13-05-42-19, Vancouver School of Economics, revised 06 Aug 2008.
- David Rahman, 2012. "But Who Will Monitor the Monitor?," American Economic Review, American Economic Association, vol. 102(6), pages 2767-97, October.
- Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4497. 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: (Klaus Wohlrabe)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.