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Title:Quality monitoring, collusion and sub-contracting PDF Logo
Authors:Kuhn, Michael
Yan, Qianhui
Issue Date:2006
Series/Report no.:Thünen-series of applied economic theory 70
Abstract:We discuss the social welfare improvement under centralized and decentralized hierarchies and focus on supervisoris ability to monitor quality. Although the possibility of collusion against the principal is eliminated under decentralized hierarchy, the decentralization is dominating only if supervisory accuracy is large enough in the case of public information. Private information about the accuracy hurts the principal under both hierarchies. The optimal effort in hierarchy A is pooling one. The dominance of decentralization over centralization depend combination of accuracies of both the low and the high type supervisor.
Document Type:Working Paper
Appears in Collections:Thünen Series of Applied Economic Theory, Universität Rostock

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