Optimal Monitoring Design
Seminar
Speaker
Balasz Szentes
Date
08/04/2019 - 12:30 - 11:10Add To Calendar
2019-04-08 11:10:00
2019-04-08 12:30:00
Optimal Monitoring Design
Joint with George Georgiadis.
This paper considers a Principal–Agent model with hidden action in which the Principal can monitor the Agent by acquiring independent signals conditional on effort at a constant marginal cost. The Principal aims to implement a target effort level at minimal cost. The main result of the paper is that the optimal information-acquisition strategy is a two-threshold policy and, consequently, the equilibrium contract specifies two possible wages for the Agent. This result provides a rationale for the frequently observed single-bonus wage contracts.
Link to paper: http://personal.lse.ac.uk/szentes/docs/monitoring.pdf
building 504, seminar room 011.
אוניברסיטת בר-אילן - Department of Economics
Economics.Dept@mail.biu.ac.il
Asia/Jerusalem
public
Place
building 504, seminar room 011.
Affiliation
London School of Economics
Abstract
Joint with George Georgiadis.
This paper considers a Principal–Agent model with hidden action in which the Principal can monitor the Agent by acquiring independent signals conditional on effort at a constant marginal cost. The Principal aims to implement a target effort level at minimal cost. The main result of the paper is that the optimal information-acquisition strategy is a two-threshold policy and, consequently, the equilibrium contract specifies two possible wages for the Agent. This result provides a rationale for the frequently observed single-bonus wage contracts.
Link to paper: http://personal.lse.ac.uk/szentes/docs/monitoring.pdf
Last Updated Date : 02/04/2019
