Random Inspections and Periodic Reviews: Optimal Dynamic Monitoring

• 成果类型: Article
• 署名作者: Varas, Felipe; Marinovic, Ivan; Skrzypacz, Andrzej
• 署名单位: Duke University; Stanford University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdaa012
• 发表日期: 2020
• 页码: 2893-2937
• 关键词: Reputation; incentives; INFORMATION; crime; grade

摘要

We study the design of monitoring in dynamic settings with moral hazard. An agent (e.g. a firm) benefits from reputation for quality, and a principal (e.g. a regulator) can learn the agent's quality via costly inspections. Monitoring plays two roles: an incentive role, because outcomes of inspections affect agent's reputation, and an informational role because the principal directly values the information. We characterize the optimal monitoring policy inducing full effort. When information is the principal's main concern, optimal monitoring is deterministic with periodic reviews. When incentive provision is the main concern, optimal monitoring is random with a constant hazard rate.