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

28 Pages Posted: 13 Feb 2004

See all articles by Andrea Ichino

Andrea Ichino

University of Bologna

Gerd Muehlheusser

University of Hamburg; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2004

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 misbehave 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.

Keywords: monitoring, probation, effort, asymmetric information

JEL Classification: D2, D8, M5

Suggested Citation

Ichino, Andrea and Muehlheusser, Gerd, How Often Should You Open the Door? Optimal Monitoring to Screen Heterogeneous Agents (January 2004). IZA Discussion Paper No. 987. Available at SSRN: https://ssrn.com/abstract=494162

Andrea Ichino

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
+39 349 5965919 (Phone)

Gerd Muehlheusser (Contact Author)

University of Hamburg ( email )

Von Melle Park 5
Hamburg, 20146
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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