Auditing and property rights
Third-party audit provides incentives to an agent whose actions affect the value of an asset. When audit intensity and outcome are unverifiable, we show that with interim-participation constraints the optimal mechanism may use only the auditor's report, disregarding the agent's information. Furthermore, the auditor obtains the asset and the agent a monetary compensation, when a high asset value is reported. This suggests regulating renewable resources or utility networks by giving entrants the option to buy the right to use the asset at a predetermined price, and financially rewarding incumbents for good performance.
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|Date of creation:||2004|
|Date of revision:|
|Publication status:||Published in: RAND Journal of Economics (2004) v.35 n° 2,p.356-372|
|Contact details of provider:|| Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles|
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