Operational Risk [21]

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Bullet points include: Suppose individuals who have not monitored are only held responsible for frauds by their immediate subordinates. Each individual  only needs to worry about monitoring by nearest superior and possible fraud by nearest subordinate. Two types of equilibrium. Corner equilibrium: all individuals commit fraud and nobody monitors. Alternative interior equilibrium: each individual commits fraud and monitors with some probability (same for all individuals), so fraud occurs intermittently at any given point in hierarchy

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