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.