When (not) to publicize inspection results

Eilon Solan and Chang Zhao

Journal of Economic Theory, 2023, vol. 210, issue C

Abstract: We consider a dynamic inspection problem between a principal and several agents. The principal observes the full inspection history, whereas each agent only observes inspections imposed on himself. When inspection resources are limited, the inspection intensities for agents are negatively correlated, and hence each agent cares not only about his own inspection history, but also about the inspection histories of the other agents. In such cases, should the principal publicly reveal past inspection history, or should she conceal this information? We show that the principal benefits from concealing inspection history. Nevertheless, this benefit becomes less significant as the number of agents increases, and disappears in the limit case with a continuum of agents.

Keywords: Dynamic inspection; Imperfect monitoring; Optimal information revelation (search for similar items in EconPapers)
JEL-codes: C73 D82 D83 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:210:y:2023:i:c:s0022053123000637

DOI: 10.1016/j.jet.2023.105667

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