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Secret Contracts for Efficient Partnerships

Author

Listed:
  • David Rahman

    (Department of Economics, University of Minnesota)

  • Ichiro Obara

    (Department of Economics, University of Minnesota)

Abstract

By allocating di erent information to team members, secret contracts can provide better incentives to perform with an intuitive organizational design. For instance, they may help to monitor monitors, and appoint secret principals. Generally, secret contracts highlight a rich duality between detection and enforcement with linear transfers. On the one hand, disobedient deviations must be detectable to enforce a given outcome, but di erent behavior may be used to detect di erent deviations. On the other hand, disobedient deviations must be attributable, i.e., some individual can be identi ed as innocent, to provide incentives with budget balance.

Suggested Citation

  • David Rahman & Ichiro Obara, 2008. "Secret Contracts for Efficient Partnerships," Working Papers 2008-3, University of Minnesota, Department of Economics, revised 06 2008.
    • Handle: RePEc:min:wpaper:2008-3
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    File URL: https://docs.google.com/a/umn.edu/viewer?a=v&pid=sites&srcid=dW1uLmVkdXxlY29ubGlicmFyeXxneDoyZmEyOWVhZDEwNmZmZTI2
    File Function: First version, 2008
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    Cited by:

    1. David Rahman, 2014. "The Power of Communication," American Economic Review, American Economic Association, vol. 104(11), pages 3737-3751, November.
    2. Alex Gershkov & Jianpei Li & Paul Schweinzer, 2009. "Efficient tournaments within teams," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 103-119, March.

    More about this item

    Keywords

    secret contracts; partnerships; duality; private monitoring.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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