Should transparency be (in-)transparent? On monitoring aversion and cooperation in teams

TL;DR

This study investigates how transparency of monitoring affects cooperation in teams, finding that making monitoring transparent increases mutual cooperation and highlights the role of conditional cooperators in promoting teamwork.

Contribution

It introduces a novel laboratory experiment to examine the effects of monitoring transparency on cooperation in a sequential Prisoner's Dilemma setting.

Findings

Mutual cooperation increases with monitoring transparency.

Conditional cooperators are more likely to monitor and promote teamwork.

Monitoring helps players screen co-players and reduce exploitation risk.

Abstract

Many modern organisations employ methods which involve monitoring of employees' actions in order to encourage teamwork in the workplace. While monitoring promotes a transparent working environment, the effects of making monitoring itself transparent may be ambiguous and have received surprisingly little attention in the literature. Using a novel laboratory experiment, we create a working environment in which first movers can (or cannot) observe second mover's monitoring at the end of a round. Our framework consists of a standard repeated sequential Prisoner's Dilemma, where the second mover can observe the choices made by first movers either exogenously or endogenously. We show that mutual cooperation occurs significantly more frequently when monitoring is made transparent. Additionally, our results highlight the key role of conditional cooperators (who are more likely to monitor) in promoting teamwork. Overall, the observed cooperation enhancing effects are due to monitoring actions that carry information about first movers who use it to better screen the type of their co-player and thereby reduce the risk of being exploited.