But Who Will Monitor the Monitor?
- (pp. 2767-97)
AbstractSuppose 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)
Citation2012. "But Who Will Monitor the Monitor?" American Economic Review, 102 (6): 2767-97. DOI: 10.1257/aer.102.6.2767
- C78 Bargaining Theory; Matching Theory
- D23 Organizational Behavior; Transaction Costs; Property Rights
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory