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This paper studies an infinite-horizon repeated moral hazard problem where a single principal employs several agents. We assume that the principal cannot observe the agents' effort choices; however, agents can

This paper studies an infinite-horizon repeated moral hazard problem where a single principal employs several agents. We assume that the principal cannot observe the agents' effort choices; however, agents can observe each other and can be contractually required to make observation reports to the principal. Observation reports, if truthful, can serve as a monitoring instrument to discipline the agents. However, reports are cheap talk so that it is also possible for agents to collude, i.e., where they shirk, earn rents, and report otherwise to the principal.

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    Date Created
    • 2015-01-01
    Resource Type
  • Text
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    Identifier
    • Digital object identifier: 10.3982/TE833
    • Identifier Type
      International standard serial number
      Identifier Value
      1555-7561

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    Chandrasekher, Madhav (2015). Unraveling in a repeated moral hazard model with multiple agents. THEORETICAL ECONOMICS, 10: 11-49. http://dx.doi.org/10.3982/TE833

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