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Article: Optimal Monitoring Design
Title | Optimal Monitoring Design |
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Authors | |
Keywords | monitoring moral hazard Principal-agent |
Issue Date | 2020 |
Citation | Econometrica, 2020, v. 88, n. 5, p. 2075-2107 How to Cite? |
Abstract | This paper considers a Principal–Agent model with hidden action in which the Principal can monitor the Agent by acquiring independent signals conditional on effort at a constant marginal cost. The Principal aims to implement a target effort level at minimal cost. The main result of the paper is that the optimal information-acquisition strategy is a two-threshold policy and, consequently, the equilibrium contract specifies two possible wages for the Agent. This result provides a rationale for the frequently observed single-bonus wage contracts. |
Persistent Identifier | http://hdl.handle.net/10722/329647 |
ISSN | 2023 Impact Factor: 6.6 2023 SCImago Journal Rankings: 17.701 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Georgiadis, George | - |
dc.contributor.author | Szentes, Balazs | - |
dc.date.accessioned | 2023-08-09T03:34:19Z | - |
dc.date.available | 2023-08-09T03:34:19Z | - |
dc.date.issued | 2020 | - |
dc.identifier.citation | Econometrica, 2020, v. 88, n. 5, p. 2075-2107 | - |
dc.identifier.issn | 0012-9682 | - |
dc.identifier.uri | http://hdl.handle.net/10722/329647 | - |
dc.description.abstract | This paper considers a Principal–Agent model with hidden action in which the Principal can monitor the Agent by acquiring independent signals conditional on effort at a constant marginal cost. The Principal aims to implement a target effort level at minimal cost. The main result of the paper is that the optimal information-acquisition strategy is a two-threshold policy and, consequently, the equilibrium contract specifies two possible wages for the Agent. This result provides a rationale for the frequently observed single-bonus wage contracts. | - |
dc.language | eng | - |
dc.relation.ispartof | Econometrica | - |
dc.subject | monitoring | - |
dc.subject | moral hazard | - |
dc.subject | Principal-agent | - |
dc.title | Optimal Monitoring Design | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.3982/ECTA16475 | - |
dc.identifier.scopus | eid_2-s2.0-85091457397 | - |
dc.identifier.volume | 88 | - |
dc.identifier.issue | 5 | - |
dc.identifier.spage | 2075 | - |
dc.identifier.epage | 2107 | - |
dc.identifier.eissn | 1468-0262 | - |
dc.identifier.isi | WOS:000572551700009 | - |