Monitoring with No Moral Hazard: The Case of Small Vessel Commercial Fishing

Orn B. Bodvarsson

Eastern Economic Journal, 1987, vol. 13, issue 4, pages 421-434

Abstract: This paper examines the role of the skipper as a monitor of crew members on fishing boats. In contrast to the usual (principal-agent) approach, there is no moral hazard. Each worker's output is variable and average performance is not known. A monitor is hired to estimate average performance. A theory and test of share differentials between monitors and workers is developed. Monitoring is treated as a sequential sampling experiment. Share differentials depend on worker-specific output variability, size of labor force, and average team output. Empirical results using Oregon fishing data offer strong support for the model.

Date: 1987
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