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How often should you open the door? Optimal monitoring to screen heterogeneous agents

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Author Info
Andrea Ichino
Gerd Muehlheusser

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Abstract

This paper shows that monitoring too much a partner in the initial phase of a relationship may not be optimal if the goal is to determine his loyalty to the match and if the cost of ending the relationship increases over time. The intuition is simple: by monitoring too much we learn less on how the partner will behave when he is not monitored. Only by giving to the partner the possibility to mis-behave he might be tempted to do it, and only in this case there is a chance to learn his type at a time where separation would be possible at a relatively low cost

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Publisher Info
Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0319.

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Date of creation: Dec 2003
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Handle: RePEc:ube:dpvwib:dp0319

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Related research
Keywords: Monitoring; probation; effort; asymmetric information;

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Find related papers by JEL classification:
D2 - Microeconomics - - Production and Organizations
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Kaplow, Louis & Shavell, Steven, 1994. "Optimal Law Enforcement with Self-Reporting of Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 583-606, June. [Downloadable!] (restricted)
    Other versions:
  2. A. Mitchell Polinsky & Steven Shavell, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March. [Downloadable!] (restricted)
    Other versions:
  3. Fahad Khalil, 1997. "Auditing Without Commitment," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 629-640, Winter. [Downloadable!] (restricted)
  4. Asha Sadanand & Venkatraman Sadanand & Denton Marks, 1989. "Probationary Contracts in Agencies with Bilateral Asymmetric Information," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 643-61, August. [Downloadable!] (restricted)
  5. Alan B. Krueger, 1991. "The evolution of unjust-dismissal legislation in the United States," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 44(4), pages 644-660, July.
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  6. George J. Mailath & Larry Samuelson, . ""Who Wants a Good Reputation?''," CARESS Working Papres 98-12, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    Other versions:
  7. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August. [Downloadable!] (restricted)
  8. Daniel Nagin & James Rebitzer & Seth Sanders & Lowell Taylor, 2002. "Monitoring, Motivation and Management: The Determinants of Opportunistic Behavior in a Field Experiment," NBER Working Papers 8811, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Dubey, Pradeep & Wu, Chien-wei, 2001. "Competitive prizes: when less scrutiny induces more effort," Journal of Mathematical Economics, Elsevier, vol. 36(4), pages 311-336, December. [Downloadable!] (restricted)
  10. Ichino, Andrea & Riphahn, Regina, 2003. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," CEPR Discussion Papers 3847, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Wang, Ruqu & Weiss, Andrew, 1998. "Probation, layoffs, and wage-tenure profiles: A sorting explanation," Labour Economics, Elsevier, vol. 5(3), pages 359-383, September. [Downloadable!] (restricted)
  12. Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-25, June. [Downloadable!] (restricted)
  13. Guasch, J Luis & Weiss, Andrew, 1981. "Self-Selection in the Labor Market," American Economic Review, American Economic Association, vol. 71(3), pages 275-84, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Julia Angerhausen, 2005. "Evaluation Frequency and Forgetful Principals," Discussion Papers in Economics 05_06, University of Dortmund, Department of Economics. [Downloadable!]
  2. Pinoli, Sara, 2008. "Screening ex-ante or screening on-the-job? The impact of the employment contract," MPRA Paper 11429, University Library of Munich, Germany. [Downloadable!]
  3. Falk, Armin & Kosfeld, Michael, 2004. "Distrust - The Hidden Cost of Control," IZA Discussion Papers 1203, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Renato Faccini, 2007. "Unemployment and Within-Group Wage Inequality: Can Information Explain the Trade-Off?," Economics Working Papers ECO2007/14, European University Institute. [Downloadable!]
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