Imperfect Monitoring of Monitoring Agents: One Reason Why Hierarchies Can Be Superior to "Lean" Organizations

No 2003-07, CSLE Discussion Paper Series from Saarland University, CSLE - Center for the Study of Law and Economics

Abstract: Effective monitoring requires proper incentives and detection skill. Detection skills depend on the extent of specialization in monitoring and on the number of agents to be supervised. This paper demonstrates that hierarchy and monitoring of monitors can provide the necessary incentives for the monitoring agents, which induces them to make use of their detection skill. The model draws on the theory of imperfect diagnosis and explains why hierarchies can be superior to 'lean' organizations.

Keywords: Hierarchy; Imperfect Diagnosis; Monitoring; Incentives (search for similar items in EconPapers)
JEL-codes: D2 L2 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:csledp:200307

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