TY - JOUR
T1 - Formal versus informal monitoring in teams
AU - Gershkov, Alex
AU - Winter, Eyal
PY - 2015
Y1 - 2015
N2 - In this paper we analyze a principal's optimal monitoring strategies in a team environment. In doing so we study the interaction between formal monitoring and informal ( peer) monitoring. We show that if the technology satisfies complementarity, peer monitoring substitutes for the principal's monitoring. However, if the technology satisfies substitution, the principal's optimal monitoring is independent of the peer monitoring. We also show that if the technology satisfies complementarity, then the principal in the optimal contracts will monitor more closely than in the case of substitution.
AB - In this paper we analyze a principal's optimal monitoring strategies in a team environment. In doing so we study the interaction between formal monitoring and informal ( peer) monitoring. We show that if the technology satisfies complementarity, peer monitoring substitutes for the principal's monitoring. However, if the technology satisfies substitution, the principal's optimal monitoring is independent of the peer monitoring. We also show that if the technology satisfies complementarity, then the principal in the optimal contracts will monitor more closely than in the case of substitution.
UR - http://www.scopus.com/inward/record.url?scp=84928882445&partnerID=8YFLogxK
U2 - 10.1257/mic.20130277
DO - 10.1257/mic.20130277
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AN - SCOPUS:84928882445
SN - 1945-7669
VL - 7
SP - 27
EP - 44
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
IS - 2
ER -