Faure-Grimaud, Antoine; Laffont, Jean-Jacques; … - In: Annals of Economics and Finance 1 (2000) 2, pp. 231-263
We propose a theory of supervision with endogenous transaction costs. A principal delegates part of his authority to a supervisor who can acquire soft information about an agent's productivity. If the supervisor were risk-neutral, the principal would simply make the better informed supervisor...