How Often Should you Open the Door? Optimal Monitoring to Screen Heterogeneous Agents

Andrea Ichino and Gerd Muehlheusser

No 4255, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper shows that over monitoring a partner in the initial phase of a relationship may not be optimal if the goal is to determine loyalty and if the cost of ending the relationship increases over time. This intuition is simple: by monitoring too much we lose the opportunity to learn how the partner will behave when not monitored. Only by allowing the partner the possibility to misbehave is there a chance to determine their characteristics at a time when separation would be possible at a relatively low cost.

Keywords: M50; Monitoring; Probation; Effort; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D20 D80 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: How often should you open the door?: Optimal monitoring to screen heterogeneous agents (2008)
Working Paper: How often should you open the door? Optimal monitoring to screen heterogeneous agents (2004)
Working Paper: How Often Should You Open the Door? Optimal Monitoring to Screen Heterogeneous Agents (2004)
Working Paper: How often should you open the door? Optimal monitoring to screen heterogeneous agents (2003)
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