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Supervision in Firms

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  • Kouroche Vafaï

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

To control, evaluate, and motivate their agents, firms employ supervisors. As shown by empirical investigations, biased evaluation by supervisors linked to collusion is a persistent feature of firms. This paper studies how deceptive supervision affects agency relationships. We consider a three-level firm where a supervisor is in charge of producing a verifiable report on an agent's output. Depending on the output he has observed, the supervisor may either collude with the agent or with the principal, and make an uniformative report. We show that the proliferation of collusive activities in firms : modifies the configuration of the optimal preventive policy, may increase the expected cost of preventing each type collusion, is beneficial to the supervisor and detrimental to the agent, and is not always harmful.

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  • Kouroche Vafaï, 2012. "Supervision in Firms," Post-Print halshs-00768900, HAL.
    • Handle: RePEc:hal:journl:halshs-00768900
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00768900
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    References listed on IDEAS

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