A Note on Strategic Sampling in Agencies
Robert Bushman, Chandra Kanodia
Management Science · 1996 · Volume 42 · Issue 1
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 rates are lowered.
Keywords
sampling, value of information, agency theory
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