ENCOURAGING TRUTHFUL REVELATION WHEN MONITORING IS COSTLY

Citation
R. Rothschild et G. Johnes, ENCOURAGING TRUTHFUL REVELATION WHEN MONITORING IS COSTLY, Omega, 23(2), 1995, pp. 231-234
Citations number
1
Journal title
OmegaACNP
ISSN journal
03050483
Volume
23
Issue
2
Year of publication
1995
Pages
231 - 234
Database
ISI
SICI code
0305-0483(1995)23:2<231:ETRWMI>2.0.ZU;2-5
Abstract
This paper addresses a problem involving a 'principal' and I potential ly large number of 'agents', in which the principal requires some rule which will ensure that agents are rewarded according to their effort. When the resources available make it impossible for the principal to monitor each agent's performance, it is desirable to ensure that any r ule which is applied will encourage truthful self-revelation. We ident ify a system of penalties which, taken together with a basis for deter mining the minimum necessary number of monitoring visits, efficiently encourages truthful revelation, We argue that such a rule has wide app licability.