Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39744
Authors: 
Kuhn, Michael
Yan, Qianhui
Year of Publication: 
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.
Subjects: 
auditing
collusion
delegation
hierarchy
quality
JEL: 
D73
D82
I18
L22
Document Type: 
Working Paper

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