Loading...
Please wait, while we are loading the content...
Similar Documents
Monitoring versus Incentives: Substitutes or Complements?
| Content Provider | Semantic Scholar |
|---|---|
| Author | Demougin, Dominique Fluet, Claude |
| Copyright Year | 1997 |
| Abstract | This paper analyzes the trade-off between monitoring and incentives in a principal-agent relationship with moral hazard. We derive general results on the optimal monitoring-incentives mix for the case where both parties are risk-neutral and the agent faces a limited liability constraint. We show that the prinicpal uses less monitoring and stronger incentives if the agent's liability limit is relaxed or if monitoring costs increase. To induce more effort on the part of the agent, the principal resorts to more monitoring or to stronger incentives, or both. In particular, there are cases where the cheapest way to induce more effort is to use lower powered incentives, but with much more precise monitoring. Cet article analyse l'arbitrage entre la verification et l'incitation dans un modele de principal-agent caract´rise par du risque moral. Nous derivons des resultats generaux pour le cas ou les deux participants sont neutres aux risques et l'agent fait face a une contrainte budgetaire. Il est montre que le principal utilisera moins de verifications et des incitations plus fortes si la contrainte budgetaire est relaxee ou si les couts de verification augmentent. Pous inciter plus d'efforts de la part de l'agent, il est montre que le principal pourrait utiliser soit plus de verifications, soit plus d'incitations, soit plus des deux. En particulier, il est possible que la methode la moins couteuse soit de reduire les incitants et de surcompenser en augmentant la precision et la verification. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.er.uqam.ca/nobel/r35124/CREFE.PS |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
