Organization of Project Evaluation and Implementation under Moral Hazard

Authors: Jost, Peter-J.; Lammers, Frauke

Source: Journal of Institutional and Theoretical Economics JITE, Volume 166, Number 2, June 2010 , pp. 212-238(27)

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Abstract:

We examine the optimal organizational form of project evaluation and implementation under moral hazard. In the evaluation phase, two fallible risk-neutral agents sequentially screen projects. The approved projects are subsequently implemented in the development phase. We show that moral hazard renders the organization as a polyarchy less attractive than as a hierarchy. Furthermore, given moral hazard, task assignment becomes relevant: For identical agents, the principal always delegates implementation to the agent who works first in the evaluation phase.

Document Type: Research article

DOI: http://dx.doi.org/10.1628/093245610791343030

Publication date: 2010-06-01

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Founded as Zeitschrift f�r die gesamte Staatswissenschaft in 1844.

As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.
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