Affiliation:
1. Yale University and CEPR (email: )
2. University of Warwick and The Hebrew University (email: )
3. Lancaster University and The Hebrew University (email: )
Abstract
A principal incentivizes a group of agents to work by choosing a monitoring structure and a scheme of performance-contingent rewards. The monitoring structure partitions the set of agents into monitoring teams, each delivering a signal of joint performance. We show that unlike under partial implementation, the principal always exhausts her monitoring capacity to optimally implement work as a unique outcome. Optimal monitoring teams are homogeneous between them: equally sized and with agents allocated in an anti-assortative fashion. Higher-effort-cost agents receive lower rents, and they tend to be monitored more closely than lower-effort-cost agents when the principal’s allocation is constrained. (JEL D82, D86, M54)
Publisher
American Economic Association