Incentives in Common Agency
This paper considers situations where an agent must allocate his nonobservable effort among several tasks and where several principals hold diverging viewpoints on what the best allocation should be. Economic theory currently sees each of these features as major obstacles to raising the strength of an agent’s incentives. This paper proposes a simple scheme - based on contingent monitoring - that can nevertheless mitigate both of these obstacles simultaneously. Under this scheme, if the agent’s absolute risk aversion decreases fast enough with respect to wealth, then the principals would coordinate their respective incentive provision so that the agent would also see his various tasks as complementary (instead of substitute) income-enhancing activities. Furthermore, coordination could be achieved in a somewhat “liberal” or decentralized way, in the sense that some principals would need to control only the tasks they have assigned to the agent. Potential applications to corporate compliance, the organization of government, and the management of innovation are briefly discussed.
|Date of creation:||Dec 2001|
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- Christoffersen, Peter & Ghysels, Eric & Swanson, Norman R., 2002.
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- Peter Christoffersen & Eric Ghysels & Norman R. Swanson, 2001. "Let's Get "Real"" about Using Economic Data"," CIRANO Working Papers 2001s-44, CIRANO.
- Peter Christoffersen & Eric Ghysels & Norman Swanson, 2000. "Let's Get "Real" About Using Economic Data," Econometric Society World Congress 2000 Contributed Papers 1004, Econometric Society.
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"Nonlinear Features of Realized FX Volatility,"
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Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
- Nathalie de Marcellis-Warin & Erwann Michel-Kerjan, 2001. "The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"""," CIRANO Working Papers 2001s-60, CIRANO.
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