Monitoring and prudence

Gabriele Cardullo () and Luca Beltrametti ()
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Gabriele Cardullo: University of Genova
Luca Beltrametti: University of Genova

Journal of Economics, 2025, vol. 146, issue 2, No 4, 235 pages

Abstract: Abstract We analyze the impact of monitoring on workers’ effort in a workplace setting where employers can precisely measure total output but cannot perfectly observe the single worker’s contribution. While traditional models highlight the efficiency gains of monitoring, we explore an alternative scenario where risk neutral firms forego monitoring, shifting all income uncertainty to risk-averse workers. We establish the conditions under which the absence of monitoring can yield higher profits than its presence. We also show that when workers’ coefficient of absolute prudence is higher than their coefficient of absolute risk aversion, total output is higher in a no-monitoring setting.

Keywords: Monitoring; Prudence; Workers’ effort (search for similar items in EconPapers)
JEL-codes: D81 J24 M52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:146:y:2025:i:2:d:10.1007_s00712-025-00913-1

DOI: 10.1007/s00712-025-00913-1

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