Showing papers by "Roland Strausz published in 1997"
TL;DR: In this article, a principal-agent relationship with moral hazard was studied, where the principal or the supervisor can monitor the agent's hidden action by using identical monitoring technologies, and it was shown that delegation of monitoring to the supervisor is profitable because of two effects.
Abstract: This paper studies a principal-agent relationship with moral hazard in which the principal or the supervisor can monitor the agent's hidden action by using identical monitoring technologies. The paper shows that delegation of monitoring to the supervisor is profitable because of two effects. With delegation the principal can better regulate the incentives (incentive effect) and can commit to wage structures to which she could not commit without delegation (commitment effect). As a logical step collusion is introduced and it is shown that even with the possibility of collusion delegation is an optimal strategy.
162 citations
TL;DR: In this paper, a principal-agent relationship with a supervisor who has information about the agent is described, and the agent and the supervisor have the possibility to collude and misinform the principal.
Abstract: This paper describes a principal-agent relationship with a supervisor who has information about the agent. The agent and the supervisor have the possibility to collude and misinform the principal. From the literature we know that there exists an optimal contract which excludes collusion in equilibrium. The optimal contract, however, is ex post inefficient and creates scope for renegotiation. If renegotiation is allowed then under some parameter constellations the optimal contract is a contract which necessarily induces collusion. The paper thus shows that the principal's behavior toward ex post inefficiencies may determine whether collusion occurs in equilibrium.
60 citations
01 Jan 1997
TL;DR: In this article, the authors consider a team in which production takes place sequentially and in which agents observe the actions taken by previous agents, and they show that for such teams sharing rules exist which are balanced and induce e cient production as the unique equilibrium outcome.
Abstract: This paper considers a team in which production takes place sequentially and in which agents observe the actions taken by previous agents. We show that for such teams sharing rules exist which are balanced and induce e cient production as the unique equilibrium outcome. This in contrast to team structures studied by Holmstrom (1982) in which agents act simultaneously. The sharing rule which induces e cient production is simple, intuitive and robust to noise, sabotage, and collusive behavior. It induces e cient production even when agents obtain imperfect information about previous actions. JEL Classi cation: D82, L23
13 citations