Use the following information to answer question:
Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the following normal form game.
-What should the manager do to solve the shirking problem?
A)Always monitor.
B)Never monitor.
C)Sincerely tell workers not to shirk.
D)Engage in "random" spot checks of the work place.

Question

Use the following information to answer question:
Suppose that you are a manager.You are considering whether or not to monitor employees with the payoffs in the following normal form game. 
-What should the manager do to solve the shirking problem?
A)Always monitor. 
B)Never monitor. 
C)Sincerely tell workers not to shirk. 
D)Engage in "random" spot checks of the work place.

Quizplus · Accepted Answer

The payoffs suggest a classic shirking problem. The employees have an incentive to shirk because they can relax and get paid anyway. However, if they both shirk, the quality of work will suffer and both employees will receive lower payoffs. Therefore, the best option for the manager is to engage in "random" spot checks of the workplace. This will create uncertainty for the employees and may incentivize them to work harder, knowing that they could be caught shirking at any moment. Always monitoring may create a sense of mistrust and reduce morale, while never monitoring will not deter shirking behavior. Sincerely telling workers not to shirk may have little effect on behavior as they may not believe the threat of punishment is credible.

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