IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v53y2022i2p404-428.html
   My bibliography  Save this article

Monitoring with career concerns

Author

Listed:
  • Iván Marinovic
  • Martin Szydlowski

Abstract

We study monitoring in a continuous‐time career concerns model. A monitor oversees an agent and generates verifiable evidence if the agent shirks. The monitor's ability is uncertain and requires costly investment to maintain. Unpunished shirking reveals that the monitor is ineffective, which discourages the monitor from maintaining her ability. The agent shirks strategically to discourage the monitor, because shirking increases the rate of learning. Term limits reduce the incentive to shirk and long‐serving monitors accept bribes to hide evidence.

Suggested Citation

  • Iván Marinovic & Martin Szydlowski, 2022. "Monitoring with career concerns," RAND Journal of Economics, RAND Corporation, vol. 53(2), pages 404-428, June.
    • Handle: RePEc:bla:randje:v:53:y:2022:i:2:p:404-428
    DOI: 10.1111/1756-2171.12412
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12412
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12412?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Carlos Corona & Ramandeep S. Randhawa, 2010. "The Auditor's Slippery Slope: An Analysis of Reputational Incentives," Management Science, INFORMS, vol. 56(6), pages 924-937, June.
    2. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1089-1127.
    3. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," American Economic Review, American Economic Association, vol. 97(1), pages 169-179, March.
    4. Godfrey Keller & Sven Rady & Martin Cripps, 2005. "Strategic Experimentation with Exponential Bandits," Econometrica, Econometric Society, vol. 73(1), pages 39-68, January.
    5. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    6. Michael Maschler, 1966. "A price leadership method for solving the inspector's non‐constant‐sum game," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 13(1), pages 11-33, March.
    7. Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 473-494.
    8. Felipe Varas & Iván Marinovic & Andrzej Skrzypacz, 2020. "Random Inspections and Periodic Reviews: Optimal Dynamic Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2893-2937.
    9. Piskorski, Tomasz & Westerfield, Mark M., 2016. "Optimal dynamic contracts with moral hazard and costly monitoring," Journal of Economic Theory, Elsevier, vol. 166(C), pages 242-281.
    10. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    11. Marina Halac & Ilan Kremer, 2020. "Experimenting with Career Concerns," American Economic Journal: Microeconomics, American Economic Association, vol. 12(1), pages 260-288, February.
    12. Dirk Bergemann & Ulrigh Hege, 2005. "The Financing of Innovation: Learning and Stopping," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 719-752, Winter.
    13. Godfrey Keller & Sven Rady, 2005. "Strategic Experimentation with Undiscounted Bandits," 2005 Meeting Papers 473, Society for Economic Dynamics.
    14. Lu, Tong & Sivaramakrishnan, K., 2009. "Mandatory audit firm rotation: Fresh look versus poor knowledge," Journal of Accounting and Public Policy, Elsevier, vol. 28(2), pages 71-91.
    15. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    16. David Martimort, 1999. "The Life Cycle of Regulatory Agencies: Dynamic Capture and Transaction Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 929-947.
    17. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1043-1064, September.
    18. Gustav Feichtinger, 1983. "A Differential Games Solution to a Model of Competition Between a Thief and the Police," Management Science, INFORMS, vol. 29(6), pages 686-699, June.
    19. Sterling Huang & Gilles Hilary, 2018. "Zombie Board: Board Tenure and Firm Performance," Journal of Accounting Research, Wiley Blackwell, vol. 56(4), pages 1285-1329, September.
    20. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1125-1156.
    21. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30, pages 1043-1064.
    22. Wouter Dessein, 2005. "Information and Control in Ventures and Alliances," Journal of Finance, American Finance Association, vol. 60(5), pages 2513-2549, October.
    23. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
    24. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
    25. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    26. Zwiebel, Jeffrey, 1996. "Dynamic Capital Structure under Managerial Entrenchment," American Economic Review, American Economic Association, vol. 86(5), pages 1197-1215, December.
    27. Alfred E. Kahn, 1988. "The Economics of Regulation: Principles and Institutions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610523, December.
    28. Yingni Guo, 2016. "Dynamic Delegation of Experimentation," American Economic Review, American Economic Association, vol. 106(8), pages 1969-2008, August.
    29. Marina Halac & Andrea Prat, 2016. "Managerial Attention and Worker Performance," American Economic Review, American Economic Association, vol. 106(10), pages 3104-3132, October.
    30. Jin Li & Arijit Mukherjee & Luis Vasconcelos, 2021. "Learning to game the system [Toward a Theory of Discounted Repeated Games with Imperfect Monitoring]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 2014-2041.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stein, Jeremy C., 2003. "Agency, information and corporate investment," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 2, pages 111-165, Elsevier.
    2. Fluck, Zsuzsanna, 1999. "The Dynamics of the Management-Shareholder Conflict," The Review of Financial Studies, Society for Financial Studies, vol. 12(2), pages 379-404.
    3. Rodivilov, Alexander, 2022. "Monitoring innovation," Games and Economic Behavior, Elsevier, vol. 135(C), pages 297-326.
    4. Orlov, Dmitry, 2022. "Frequent monitoring in dynamic contracts," Journal of Economic Theory, Elsevier, vol. 206(C).
    5. Mayer, Simon, 2022. "Financing breakthroughs under failure risk," Journal of Financial Economics, Elsevier, vol. 144(3), pages 807-848.
    6. Lewis A. Kornhauser & W. Bentley MacLeod, 2012. "Contracts between Legal Persons [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    7. Tinghua Yu, 2021. "Accountability and learning with motivated agents," BCAM Working Papers 2107, Birkbeck Centre for Applied Macroeconomics.
    8. Tinghua Yu, 2022. "Accountability and learning with motivated agents," Journal of Theoretical Politics, , vol. 34(2), pages 313-329, April.
    9. Achim, Peter & Knoepfle, Jan, 2024. "Relational enforcement," Theoretical Economics, Econometric Society, vol. 19(2), May.
    10. Committee, Nobel Prize, 2016. "Oliver Hart and Bengt Holmström: Contract Theory," Nobel Prize in Economics documents 2016-1, Nobel Prize Committee.
    11. Ilan Guttman & Iván Marinovic, 2018. "Debt contracts in the presence of performance manipulation," Review of Accounting Studies, Springer, vol. 23(3), pages 1005-1041, September.
    12. Oliver Hart, 2001. "Financial Contracting," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1079-1100, December.
    13. Richard Windram, 2005. "Risk‐Taking Incentives: A Review of the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 65-90, February.
    14. Eduard Marinov, 2016. "The 2016 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 97-149.
    15. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    16. Datta, Deepak K. & Basuil, Dynah A. & Agarwal, Ankita, 2020. "Effects of board characteristics on post-acquisition performance: A study of cross-border acquisitions by firms in the manufacturing sector," International Business Review, Elsevier, vol. 29(3).
    17. Schmitz, Patrick W., 2021. "On the optimality of outsourcing when vertical integration can mitigate information asymmetries," Economics Letters, Elsevier, vol. 202(C).
    18. Ernst Fehr & Michael Powell & Tom Wilkening, 2014. "Handing Out Guns at a Knife Fight: Behavioral Limitations of Subgame-Perfect Implementation," CESifo Working Paper Series 4948, CESifo.
    19. Tinghua Yu, 2021. "Intrinsic Motivation, Office Incentives, and Innovation," BCAM Working Papers 2106, Birkbeck Centre for Applied Macroeconomics.
    20. Schinkel, M.P. & Tóth, L. & Tuinstra, J., 2014. "Discretionary Authority and Prioritizing in Government Agencies," CeNDEF Working Papers 14-15, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:53:y:2022:i:2:p:404-428. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.