Formal versus Informal Monitoring in Teams

Alex Gershkov and Eyal Winter ()

American Economic Journal: Microeconomics, 2015, vol. 7, issue 2, 27-44

Abstract: In this paper we analyze a principal's optimal monitoring strategies in a team environment. In doing so we study the interaction between formal monitoring and informal (peer) monitoring. We show that if the technology satisfies complementarity, peer monitoring substitutes for the principal's monitoring. However, if the technology satisfies substitution, the principal's optimal monitoring is independent of the peer monitoring. We also show that if the technology satisfies complementarity, then the principal in the optimal contracts will monitor more closely than in the case of substitution. (JEL D23, D82, M54)

JEL-codes: D23 D82 M54 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mic.20130277
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Citations: View citations in EconPapers (8)

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