Skip to main content

Advertisement

SpringerLink
Log in

Correlated payoffs in the inspection game: some theory and an application to corruption

  • Published:
Public Choice Aims and scope Submit manuscript

Abstract

The inspection game as formulated by Tsebelis (Am. Polit. Sci. Rev. 83:77–91, 1989) has the counterintuitive implication that crime is unaffected by the magnitude of the penalty. This paper demonstrates that to attain this outcome, it is necessary to assume independence of enforcer and offender payoffs. Given correlated payoffs, the comparative statics of the equilibrium yield an inverse relationship between crime and the severity of the sanction. In an application, we enrich the framework of Tsebelis by adding corruption stages and show that this can imply such a correlation of payoffs. Another interesting finding is that harsher anticorruption measures can increase crime incentives.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aidt, T. S. (2003). Economic analysis of corruption: A survey. Economic Journal, 113, F632–F652.

    Article  Google Scholar 

  • Andreozzi, L. (2002). Oscillations in the enforcement of law: An evolutionary analysis. Homo Oeconomicus, 18, 403–428.

    Google Scholar 

  • Andreozzi, L. (2004). Rewarding policemen increases crime: Another surprising result from the inspection game. Public Choice, 121, 69–82.

    Article  Google Scholar 

  • Bar-Gill, O., & Harel, A. (2001). Crime rates and expected sanctions: The economics of deterrence revisited. Journal of Legal Studies, 30, 485–501.

    Article  Google Scholar 

  • Bardhan, P. (1997). Corruption and development: A review of issues. Journal of Economic Literature, 35, 1320–1346.

    Google Scholar 

  • Basu, K., Bhattacharya, S., & Mishra, A. (1992). Notes on bribery and the control of corruption. Journal of Public Economics, 48, 349–359.

    Article  Google Scholar 

  • Becker, G. S., & Stigler, G. J. (1974). Law enforcement, malfeasance, and compensation of enforcers. Journal of Legal Studies, 3, 1–18.

    Article  Google Scholar 

  • Bianco, W. T., Ordeshook, P. C., & Tsebelis, G. (1990). Crime and punishment: Are one-shot, two-persons games enough? American Political Science Review, 84, 569–586.

    Article  Google Scholar 

  • Bowles, R. (2000). Corruption. In B. Bouckaert & G. De Geest (Eds.), Encyclopedia of law and economics (Vol. V, pp. 460–491). Cheltenham: Edward Elgar.

    Google Scholar 

  • Bowles, R., & Garoupa, N. (1997). Casual police corruption and the economics of crime. International Review of Law and Economics, 17, 75–87.

    Article  Google Scholar 

  • Cadot, O. (1987). Corruption as a gamble. Journal of Public Economics, 33, 223–244.

    Article  Google Scholar 

  • Chander, P., & Wilde, L. (1992). Corruption in tax administration. Journal of Public Economics, 49, 333–349.

    Article  Google Scholar 

  • Chang, C. C., Mjelde, J. W., & Ozuna, T. (1998). Political pressure and regulatory control. Public Choice, 97, 687–700.

    Article  Google Scholar 

  • Chang, J. J., Lai, C. C., & Yang, C. C. (2000). Casual police corruption and the economics of crime: Further results. International Review of Law and Economics, 20, 35–51.

    Article  Google Scholar 

  • Chiappori, P.-A., Levitt, S., & Groseclose, T. (2002). Testing mixed-strategy equilibria when players are heterogeneous: The case of penalty kicks in soccer. American Economic Review, 92, 1138–1151.

    Article  Google Scholar 

  • Franckx, L. (2004). Penalty and crime with lumpy choices. Journal of Theoretical Politics, 16, 403–421.

    Article  Google Scholar 

  • Fudenberg, D., & Tirole, J. (1991). Game theory. Cambridge: MIT Press.

    Google Scholar 

  • Funk, P. (2005). Governmental action, social norms, and criminal behavior. Journal of Institutional and Theoretical Economics, 161, 522–535.

    Article  Google Scholar 

  • Garoupa, N. (2008, forthcoming). An economic analysis of criminal law. In A. Hatzis (Ed.), Economic analysis of law: A European perspective. Cheltenham: Edward Elgar.

  • Garoupa, N., & Jellal, M. (2007). Further notes on information, corruption and optimal law enforcement. European Journal of Law and Economics, 23, 59–69.

    Article  Google Scholar 

  • Garoupa, N., & Klerman, D. (2004). Corruption and the optimal use of nonmonetary sanctions. International Review of Law and Economics, 24, 219–225.

    Article  Google Scholar 

  • Graetz, M. J., Reinganum, J. F., & Wilde, L. (1986). The tax compliance game: Toward an interactive theory of law enforcement. Journal of Law, Economics, and Organization, 2, 1–32.

    Google Scholar 

  • Harris, M., & Raviv, A. (1978). Some results on incentive contracts with applications to education and employment, health insurance, and law enforcement. American Economic Review, 68, 20–30.

    Google Scholar 

  • Hirshleifer, J., & Rasmusen, E. (1992). Are equilibrium strategies unaffected by incentives? Journal of Theoretical Politics, 4, 353–367.

    Article  Google Scholar 

  • Holler, M. J. (1993). Fighting pollution when decisions are strategic. Public Choice, 76, 347–356.

    Article  Google Scholar 

  • Holler, M. J. (1997). Fighting pollution when decisions are strategic: A reply. Public Choice, 98, 465–466.

    Article  Google Scholar 

  • Levitt, S. D., & Miles, T. J. (2007). Empirical study of criminal punishment. In A. M. Polinsky & S. Shavell (Eds.), The handbook of law and economics (pp. 455–495). Amsterdam: North Holland.

    Chapter  Google Scholar 

  • Marjit, S., & Shi, H. (1998). On controlling crime with corrupt officials. Journal of Economic Behavior and Organization, 34, 163–172.

    Article  Google Scholar 

  • McCabe, K. A., Mukherji, A., & Runkle, D. (2000). An experimental study of information and mixed-strategy play in the three-person matching-pennies game. Economic Theory, 15, 421–462.

    Article  Google Scholar 

  • Mookherjee, D., & Png, I. P. L. (1995). Corruptible law enforcers: How should they be compensated? Economic Journal, 105, 145-159.

    Google Scholar 

  • O’Neill, B. (1987). Nonmetric test of the minimax theory of two-person zerosum games. Proceedings of the National Academy of Sciences, 84, 2106–2109.

    Article  Google Scholar 

  • Pogrebna, G. (2005). Do people play Nash? A natural experiment on strategic voting in The Weakest Link. Paper presented at the XIth Spring Meeting of Young Economists, Sevilla.

  • Polinsky, A. M., & Shavell, S. (2001). Corruption and optimal law enforcement. Journal of Public Economics, 81, 1–24.

    Article  Google Scholar 

  • Polinsky, A. M., & Shavell, S. (2007). The economic theory of public enforcement of law. In A. M. Polinsky & S. Shavell (Eds.), The handbook of law and economics (pp. 403–454). Amsterdam: North Holland.

    Chapter  Google Scholar 

  • Rose-Ackerman, S. (1975). The economics of corruption. Journal of Public Economics, 4, 187–203.

    Article  Google Scholar 

  • Rose-Ackerman, S. (1999). Corruption and government: Causes, consequences, and reform. Cambridge: Cambridge University Press.

    Google Scholar 

  • Schrag, J., & Scotchmer, S. (1997). The self-reinforcing nature of crime. International Review of Law and Economics, 17, 325–335.

    Article  Google Scholar 

  • Tirole, J. (1994). The internal organization of government. Oxford Economic Papers, 46, 1–29.

    Google Scholar 

  • Toma, M. (1989). Will bounty-hunting revenue agents increase enforcement? Public Choice, 61, 247–260.

    Article  Google Scholar 

  • Tsebelis, G. (1989). The abuse of probability in political analysis: The Robinson Crusoe fallacy. American Political Science Review, 83, 77–91.

    Article  Google Scholar 

  • Tsebelis, G. (1990a). Are sanctions effective? A game-theoretic analysis. Journal of Conflict Resolution, 34, 3–28.

    Article  Google Scholar 

  • Tsebelis, G. (1990b). Penalty has no impact on crime: A game-theoretic analysis. Rationality and Society, 2, 255–286.

    Article  Google Scholar 

  • Tsebelis, G. (1993). Penalty and crime: Further theoretical considerations and empirical evidence. Journal of Theoretical Politics, 5, 349–374.

    Article  Google Scholar 

  • Van Rijckeghem, C., & Weder, B. (2001). Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much? Journal of Development Economics, 65, 307–331.

    Article  Google Scholar 

  • Walker, M., & Wooders, J. (2001). Minimax play at Wimbledon. American Economic Review, 91, 1521–38.

    Google Scholar 

  • Yaniv, G. (2001). Revenge, tax informing, and the optimal bounty. Journal of Public Economic Theory, 3, 225–233.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Eberhard Karls University, Melanchthonstr. 30, 72074, Tübingen, Germany

    Tim Friehe

Authors
  1. Tim Friehe
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Tim Friehe.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Friehe, T. Correlated payoffs in the inspection game: some theory and an application to corruption. Public Choice 137, 127–143 (2008). https://doi.org/10.1007/s11127-008-9317-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11127-008-9317-7

Keywords

JEL Classification

Search

Navigation