Monitoring multiple agents: The role of hierarchies |
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| Institution: | 1. Room 505, William M.W. Mong Engineering Building, Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong;2. Department of Industrial Engineering and Operations Research, Columbia University, United States;1. Department of Economics, University of Iowa, IA 52242, United States;2. Department of Economics, University of Wisconsin-Madison, WI 53706, United States |
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| Abstract: | This paper presents an analysis of principal/multiple-agent problems when there are monitoring possibilities. A principal/owner of a firm has to decide whether or not to employ one or more supervisors who can observe noisy signals on the workers/agents' actions. For both workers and supervisors there is a moral hazard problem. The optimal allocation of monitoring activities and determinants of the decision to hire a supervisor are discussed, and it is explored how multi-level monitoring-hierarchies are structured in such a firm. |
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