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

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 04.11.2003, 12:15 - 13:30

   

Presentation by 

Andrea Ichino (European University Institute)
   

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 her 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 she is not monitored. Only by giving to the partner the possibility to mis-behave she might be tempted to do it, and only in this case there is a chance to learn her type at a time where separation would be possible at a relatively low cost.

   
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