Abstract
This paper studies sample design for process control in principal-agent settings where deterrence rather than ex post detection is the main issue. We show how the magnitude of gains from additional sampling can be calculated and traded off against sampling costs. It is shown that the optimal sample size shrinks as target defect rates are lowered.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 151-156 |
| Number of pages | 6 |
| Journal | Management Science |
| Volume | 42 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 1996 |
Keywords
- Agency Theory
- Sampling
- Value of Information