Monitoring a Common Agent: Implications for Financial Contracting

Fahad Khalil, David Martimort and Bruno Maria Parigi

No 1514, CESifo Working Paper Series from CESifo

Abstract: We study the problem of multiple principals who want to obtain income from a privately informed agent and design their contracts non-cooperatively. Our analysis reveals that the degree of coordination between principals has strong implications for the shapes of contracts and the amount of monitoring. Equity-like contracts and excessive monitoring emerge when principals are able to coordinate monitoring or verify each others’ monitoring efforts. When this is not possible, free riding in monitoring weakens the incentive to monitor, so that flat payments, debt-like contracts and very low levels of monitoring appear. Free riding may be so strong that there may even be less monitoring than if the principals cooperated with each other, which shows that non-cooperative monitoring does not necessarily lead to excessive monitoring.

Keywords: monitoring; common agency; costly state verification (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-fin and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp1514.pdf (application/pdf)

Related works:
Journal Article: Monitoring a common agent: Implications for financial contracting (2007)
Working Paper: Monitoring a Common Agent: implications for financial contracting (2007)
Working Paper: Monitoring a Common Agent: Implications for Financial Contracting (2004)
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:_1514

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 ().