Suppose the probability of an employee being caught shirking, q, is a function of the employer's monitoring, M, such that q = M/100
If workers must put up a $1,000 bond and the gain to each worker from shirking is $100, what is the employer's optimal level of monitoring that is just sufficient to discourage shirking?
Workers are deterred from shirking if q = G/B = 0.10. Ten units of monitoring are necessary to achieve q = 0.10.
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