Intrinsic Motivation and Monitoring in the Principal-Agent Model

Student: Myrikova Tatiana

Educational Programme: Joint HSE-NES Undergraduate Program in Economics (Bachelor)

Year of Graduation: 2016

In this paper I analyze the behavior and the interactions of the Principle and the Agent in the Principal-Agent model. I analyze the impact of monitoring on the relationship between the Principal and the Agent in the "Principal-Agent" model based on intrinsic motivation parameters. For this purpose, I present a dynamic game of the relationship of the Principal and the Agent with incomplete information that describes the following phenomenon – the reduction of the Agent’s effort in response to the introduction of the monitoring, due to the disutility that the Agent receive from the Principal’s underestimation of the Agent’s intrinsic motivation. Presented model shows that described above equilibrium exists and also provide all the necessary for this equilibrium conditions.

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