We consider a principal–agent relationship in which the principal's monitoring can be obstructive to the agent, reducing the agent's productivity. We show that, with obstructive monitoring, the optimal output schedule is distorted in all directions—the high‐cost agent produces less, and the low‐cost agent produces more than the first‐best levels.
Obstructive MonitoringAaron Finkle, Dongsoo Shin ,
4( 29 )
Journal of Economic and Management Strategy