tries to monitor performance of the participant with information,
and to make this performance part of the terms of the contract. Fire insurance companies have inspectors who observe precautions taken by their large industrial customers. Auto theft insurers may give discounts to customers
who have anti-theft devices on their cars. Unemployment insurance runs
out after a few weeks of unemployment. Firms try to monitor their workers'
performance. People that hire contractors often hire inspectors to observe
that construction proceeds according to specifications. Because monitoring
is expensive, and usually imperfect, even with monitoring the problem of
moral hazard remains a serious one.