Impact of Alternative Reporting Systems in Multi-Agent Contracting

Abstract

The analysis in this paper extends the single-agent/multi-task LEN model in Feltham/Xie (1994) to a multi-agent/multi-task context. A key feature of the paper is that we consider the impact of alternative reporting systems on full- and limited-commitment contracts. With a centralized reporting system all performance measures are reported to the principal, while some measures are not reported to the principal with a decentralized reporting system. Under limited commitment, the principal may prefer to restrict the agents' access to certain measures. While additional reports are weakly preferred if there is full commitment, these reports may have a negative effect if there is limited commitment.