Moral Hazard in Hierarchies and Soft Information

DSpace/Manakin Repository

Show simple item record ANGELUCCI, Charles RUSSO, Antonio 2012-11-06T13:03:56Z 2012-11-06T13:03:56Z 2012
dc.identifier.issn 1028-3625
dc.description.abstract We investigate the scope for supervisory activities in organizations in which information is non-verifiable (i.e. soft) and opportunism severe. A principal-supervisor agent hierarchy is considered. Side-contracts between supervisor and agent may be reached both before and after the agent has chosen his hidden action. We find that the supervisor is useful if and only if appointed before the agent has chosen his action. The supervisor is instead useless if asked to verify the agent‘s action only once the latter is completed. We also show that delegation of payroll authority is suboptimal. Finally, some insights concerning the optimal design of verification activities are provided: when information is soft, the supervisor should be employed as a monitor rather than as an auditor. en
dc.format.mimetype application/pdf
dc.language.iso en en
dc.relation.ispartofseries EUI RSCAS en
dc.relation.ispartofseries 2012/59 en
dc.rights info:eu-repo/semantics/openAccess
dc.subject Collusion en
dc.subject Extortion en
dc.subject Delegation en
dc.subject Mechanism design en
dc.subject D82 en
dc.subject D86 en
dc.subject L23 en
dc.title Moral Hazard in Hierarchies and Soft Information en
dc.type Working Paper en
eui.subscribe.skip true

Files in this item

This item appears in the following Collection(s)

Show simple item record