Monitoring technology with false positives. Consider the labor market model of Shapiro and Stiglitz (1984). Suppose that the rms monitoring technology returns both false negatives and false positives. Specically, the monitoring technology correctly identies a shirking worker with probability q and mistakes him for a diligent worker with probability 1 q, q 2 (0; 1). Moreover, the monitoring technology correctly identies a diligent worker with probability 1m, and mistakes him for a shirking worker with probability m, m 2 (0; q). The rm res all workers identied (correctly or not) as shirkers