Obstructive Monitoring

Aaron Finkle ()
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Aaron Finkle: Department of Economics, Davidson College

No 14-05, Working Papers from Davidson College, Department of Economics

Abstract: This paper considers a principal-agent relationship in which the principal's monitoring can be obstructive to the agent, reducing the agent's productivity. We find that, when monitoring is obstructive, the optimal output schedule is distorted in all directions - the efficient agent produces more and the inefficient agent produces less than the first-best level. Moreover, if the principal has a choice, she will make monitoring deliberately obstructive in the optimal contract as a penalty device, even though it reduces the agent's productivity. Publication Status: working paper

Keywords: Principal-Agent; Obstruction; Monitoring Creation Date: 2014 (search for similar items in EconPapers)
JEL-codes: D82 D86 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
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