http://repub.eur.nl/res/concept/jel-D73/ Recent publications classified by JEL Code D73 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/6573/ 2005-05-31T00:00:00Z We consider a hierarchical organization with two fully rational agents. The goal of the organization is that of selecting the best alternative out of several available, and agents are heterogenous in the accuracy with which they screen the alternatives. We show that, if internal communications between agents is not possible, the ordering of agents affects the performance of the organization. More specifically, we find that the expected payoff of the organization improves when the more accurate agent screens first. Finally, we note that such optimal ordering makes the hierarchy formally identical to one in which the internal communication flow is perfect. Ficco, S.S. Karamychev, V.A. http://repub.eur.nl/res/pub/11360/ 1999-01-01T00:00:00Z Abstract This paper considers a principal–agent model with auditing and collusion, in which the audit costs are a convex function of the audit reliability. The focus of interest is the question of the audit reliability chosen by the principal. It turns out that the optimal audit reliability strongly depends on the given maximum punishment and on whether collusion is possible or not. The principal chooses a higher level of reliability if collusion is possible. Moreover, in the presence of a high maximum punishment, the optimal corruptible auditor is very reliable and very expensive, whereas the optimal honest auditor is unreliable and cheap. Dittmann, I.