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American Economic Review: Vol. 102 No. 6 (October 2012)
AER Volume. 102, Issue 6 | 
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But Who Will Monitor the Monitor?
Article Citation
Rahman, David. 2012. "But Who Will Monitor the Monitor?."
American Economic Review,
102(6): 2767-97.
DOI: 10.1257/aer.102.6.2767
DOI: 10.1257/aer.102.6.2767
Abstract
Suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations. What about the monitor's deviations? To address this question, I propose a contract that makes the monitor responsible for monitoring, and thereby provides incentives even when the monitor's observations are not only private, but costly, too. I also characterize exactly when such a contract can provide monitors with the right incentives to perform. In doing so, I emphasize virtual enforcement and suggest its implications for the theory of repeated games. (JEL C78, D23, D82, D86)
Article Full-Text Access
Full-text Article
Additional Materials
Online Appendix (305.45 KB)
Authors
Rahman, David (U MN)
JEL Classifications
C78: Bargaining Theory; Matching Theory
D23: Organizational Behavior; Transaction Costs; Property Rights
D82: Asymmetric and Private Information; Mechanism Design
D86: Economics of Contract: Theory
D23: Organizational Behavior; Transaction Costs; Property Rights
D82: Asymmetric and Private Information; Mechanism Design
D86: Economics of Contract: Theory
