Private Monitoring, Collusion and the Timing of Information

Fahad Khalil, Jacques Lawarree and Troy J. Scott

No 4497, CESifo Working Paper Series from CESifo

Abstract: When a principal’s monitoring information is private (non-verifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent’s wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources—the so-called burning of money. A more realistic and efficient outcome is feasible when the private information arrives in time to rescale the agent’s effort. Rescaling is more effective than pure monetary penalties because effort has different values to different parties while money is equally valuable to all parties. Furthermore, when rescaling is feasible, private monitoring is more efficient than public monitoring subject to collusion because non-monetary penalties are ineffective to deter collusion.

Keywords: monitoring; unverifiable signal; private communication; timing of information; collusion; non-monetary penalties; burning money (search for similar items in EconPapers)
JEL-codes: D73 D82 D86 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp4497.pdf (application/pdf)

Related works:
Journal Article: Private monitoring, collusion, and the timing of information (2015)
Working Paper: Private Monitoring, Collusion and the Timing of Information (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4497

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().