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Many modern organisations employ methods which involve monitoring ofemployees' actions in order to encourage teamwork in the workplace. Whilemonitoring promotes a transparent working environment, the effects of makingmonitoring itself transparent may be ambiguous and have received surprisinglylittle attention in the literature. Using a novel laboratory experiment, wecreate a working environment in which first movers can (or cannot) observesecond mover's monitoring at the end of a round. Our framework consists of astandard repeated sequential Prisoner's Dilemma, where the second mover canobserve the choices made by first movers either exogenously or endogenously. Weshow that mutual cooperation occurs significantly more frequently whenmonitoring is made transparent. Additionally, our results highlight the keyrole of conditional cooperators (who are more likely to monitor) in promotingteamwork. Overall, the observed cooperation enhancing effects are due tomonitoring actions that carry information about first movers who use it tobetter screen the type of their co-player and thereby reduce the risk of beingexploited.

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