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.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Apr 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Box 353330, Seattle, WA 98193-3330|
Web page: http://www.econ.washington.edu/
More information through EDIRC
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.:
- Bentley W. MacLeod, 2003.
"Optimal Contracting with Subjective Evaluation,"
American Economic Review,
American Economic Association, vol. 93(1), pages 216-240, March.
- 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.
- 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.
- 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," 2005 Meeting Papers 431, Society for Economic Dynamics.
- 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.
- Vianney Dequiedt & David Martimort, 2007.
"Mechanism Design with Private Communication,"
NajEcon Working Paper Reviews
- Roland Strausz, 1997.
"Delegation of Monitoring in a Principal-Agent Relationship,"
Review of Economic Studies,
Oxford University Press, vol. 64(3), pages 337-357.
- Strausz, R.G., 1995. "Delegation of Monitoring in a Principal-Agent Relationship," Discussion Paper 1995-60, Tilburg University, Center for Economic Research.
- 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.
- Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
- 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 & Martimort, David, 2003. " Regulatory Inertia," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 413-37, Autumn.
- 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:udb:wpaper:uwec-2011-08. 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: (Michael Goldblatt)
If references are entirely missing, you can add them using this form.