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STICERD Economic Theory Seminars

Dynamic Monitoring Design

Yu Fu Wong (Warwick)

Thursday 16 May 2024 15:30 - 17:00

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


About this event

This paper introduces flexible endogenous monitoring in dynamic moral hazard. A principal can commit to not only an employment plan but also the monitoring technology to incentivize dynamic effort from an agent. Optimal monitoring follows a Poisson process that produces rare informative signals, and the optimal employment plan features increasing entrenchment. To incentivize persistent effort, the Poisson monitoring takes the form of "bad news" that leads to immediate termination. Monitoring is non-stationary: the bad news becomes more precise and less frequent. When persistent effort is not required, the optimal incentive scheme features a trial period of non-stationary monitoring, and a combination of Poisson bad news that leads to termination and Poisson good news that leads to tenure.

Economic Theory Seminars are held on Thursdays in term time at 15:30-17:00, both ONLINE and IN PERSON in SAL 3.05.

Seminar organisers: Dr Andrew Ellis and Dr Christopher Sandmann.

For further information please contact Sadia Ali: s.ali43@lse.ac.uk.

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