Optimal Auditing Under Intermediated Contracting
This paper builds on Faure-Grimaud and Martimort’s [Economics Letters 71 (2001) 75-82] analysis of intermediated contracting. I argue that intermediated contracting permits one form of auditing, in which the sub-contract offered to the firm is examined, contingent on the intermediary’s report. Auditing reduces the intermediary’s rent and increases allocative efficiency.
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- Faure-Grimaud, Antoine & Martimort, David, 2001. "On some agency costs of intermediated contracting," Economics Letters, Elsevier, vol. 71(1), pages 75-82, April.
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