Secret Contracts for Efficient Partnerships

By allocating dierent information to team members, secret contracts can provide better incentives to perform with an intuitive organizational design. For instance, they may help to monitor monitors, and appoint secret principals. Generally, secret contracts highlight a rich duality between detection and enforcement with linear transfers. On the one hand, disobedient deviations must be detectable to enforce a given outcome, but dierent behavior may be used to detect dierent deviations. On the other hand, disobedient deviations must be attributable, i.e., some individual can be identied as innocent, to provide incentives with budget balance.