Monitoring and Motivation in Principal-Agent Relationships: Some Issues in the Case of Local Authority Services.

This paper examines a number of issues concerning the effects of monitoring on principals and agents involved in the provision of local authority services subject to competition. It examines, and then extends, existing theoretical work indicating the potential for sub-optimal outcomes that result from the principal introducing monitoring schemes which focus upon the measurable aspects of the agent's performance. The paper then departs from the received principal-agent paradigm in order to consider whether monitoring and competitive regimes more generally have negative effects on the welfare and performance of principals and agents in both theory and practice. Copyright 2000 by Scottish Economic Society.