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Imperfect Monitoring of Monitoring Agents: One Reason Why Hierarchies Can Be Superior to "Lean" Organizations

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  • Kirstein, Roland

Abstract

Effective monitoring requires proper incentives and detection skill. Detection skills depend on the extent of specialization in monitoring and on the number of agents to be supervised. This paper demonstrates that hierarchy and monitoring of monitors can provide the necessary incentives for the monitoring agents, which induces them to make use of their detection skill. The model draws on the theory of imperfect diagnosis and explains why hierarchies can be superior to ?lean? organizations.

Suggested Citation

  • Kirstein, Roland, 2003. "Imperfect Monitoring of Monitoring Agents: One Reason Why Hierarchies Can Be Superior to "Lean" Organizations," CSLE Discussion Paper Series 2003-07, Saarland University, CSLE - Center for the Study of Law and Economics.
  • Handle: RePEc:zbw:csledp:200307
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    References listed on IDEAS

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    More about this item

    Keywords

    Hierarchy; Imperfect Diagnosis; Monitoring; Incentives;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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