Public Choice

, Volume 137, Issue 1–2, pp 127–143 | Cite as

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



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.


Inspection game Crime Payoff correlation Corruption Incentives 

JEL Classification

K42 H00 C72 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aidt, T. S. (2003). Economic analysis of corruption: A survey. Economic Journal, 113, F632–F652. CrossRefGoogle Scholar
  2. Andreozzi, L. (2002). Oscillations in the enforcement of law: An evolutionary analysis. Homo Oeconomicus, 18, 403–428. Google Scholar
  3. Andreozzi, L. (2004). Rewarding policemen increases crime: Another surprising result from the inspection game. Public Choice, 121, 69–82. CrossRefGoogle Scholar
  4. Bar-Gill, O., & Harel, A. (2001). Crime rates and expected sanctions: The economics of deterrence revisited. Journal of Legal Studies, 30, 485–501. CrossRefGoogle Scholar
  5. Bardhan, P. (1997). Corruption and development: A review of issues. Journal of Economic Literature, 35, 1320–1346. Google Scholar
  6. Basu, K., Bhattacharya, S., & Mishra, A. (1992). Notes on bribery and the control of corruption. Journal of Public Economics, 48, 349–359. CrossRefGoogle Scholar
  7. Becker, G. S., & Stigler, G. J. (1974). Law enforcement, malfeasance, and compensation of enforcers. Journal of Legal Studies, 3, 1–18. CrossRefGoogle Scholar
  8. 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. CrossRefGoogle Scholar
  9. 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
  10. Bowles, R., & Garoupa, N. (1997). Casual police corruption and the economics of crime. International Review of Law and Economics, 17, 75–87. CrossRefGoogle Scholar
  11. Cadot, O. (1987). Corruption as a gamble. Journal of Public Economics, 33, 223–244. CrossRefGoogle Scholar
  12. Chander, P., & Wilde, L. (1992). Corruption in tax administration. Journal of Public Economics, 49, 333–349. CrossRefGoogle Scholar
  13. Chang, C. C., Mjelde, J. W., & Ozuna, T. (1998). Political pressure and regulatory control. Public Choice, 97, 687–700. CrossRefGoogle Scholar
  14. 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. CrossRefGoogle Scholar
  15. 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. CrossRefGoogle Scholar
  16. Franckx, L. (2004). Penalty and crime with lumpy choices. Journal of Theoretical Politics, 16, 403–421. CrossRefGoogle Scholar
  17. Fudenberg, D., & Tirole, J. (1991). Game theory. Cambridge: MIT Press. Google Scholar
  18. Funk, P. (2005). Governmental action, social norms, and criminal behavior. Journal of Institutional and Theoretical Economics, 161, 522–535. CrossRefGoogle Scholar
  19. Garoupa, N. (2008, forthcoming). An economic analysis of criminal law. In A. Hatzis (Ed.), Economic analysis of law: A European perspective. Cheltenham: Edward Elgar. Google Scholar
  20. Garoupa, N., & Jellal, M. (2007). Further notes on information, corruption and optimal law enforcement. European Journal of Law and Economics, 23, 59–69. CrossRefGoogle Scholar
  21. Garoupa, N., & Klerman, D. (2004). Corruption and the optimal use of nonmonetary sanctions. International Review of Law and Economics, 24, 219–225. CrossRefGoogle Scholar
  22. 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
  23. 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
  24. Hirshleifer, J., & Rasmusen, E. (1992). Are equilibrium strategies unaffected by incentives? Journal of Theoretical Politics, 4, 353–367. CrossRefGoogle Scholar
  25. Holler, M. J. (1993). Fighting pollution when decisions are strategic. Public Choice, 76, 347–356. CrossRefGoogle Scholar
  26. Holler, M. J. (1997). Fighting pollution when decisions are strategic: A reply. Public Choice, 98, 465–466. CrossRefGoogle Scholar
  27. 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. CrossRefGoogle Scholar
  28. Marjit, S., & Shi, H. (1998). On controlling crime with corrupt officials. Journal of Economic Behavior and Organization, 34, 163–172. CrossRefGoogle Scholar
  29. 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. CrossRefGoogle Scholar
  30. Mookherjee, D., & Png, I. P. L. (1995). Corruptible law enforcers: How should they be compensated? Economic Journal, 105, 145-159. Google Scholar
  31. 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. CrossRefGoogle Scholar
  32. 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. Google Scholar
  33. Polinsky, A. M., & Shavell, S. (2001). Corruption and optimal law enforcement. Journal of Public Economics, 81, 1–24. CrossRefGoogle Scholar
  34. 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. CrossRefGoogle Scholar
  35. Rose-Ackerman, S. (1975). The economics of corruption. Journal of Public Economics, 4, 187–203. CrossRefGoogle Scholar
  36. Rose-Ackerman, S. (1999). Corruption and government: Causes, consequences, and reform. Cambridge: Cambridge University Press. Google Scholar
  37. Schrag, J., & Scotchmer, S. (1997). The self-reinforcing nature of crime. International Review of Law and Economics, 17, 325–335. CrossRefGoogle Scholar
  38. Tirole, J. (1994). The internal organization of government. Oxford Economic Papers, 46, 1–29. Google Scholar
  39. Toma, M. (1989). Will bounty-hunting revenue agents increase enforcement? Public Choice, 61, 247–260. CrossRefGoogle Scholar
  40. Tsebelis, G. (1989). The abuse of probability in political analysis: The Robinson Crusoe fallacy. American Political Science Review, 83, 77–91. CrossRefGoogle Scholar
  41. Tsebelis, G. (1990a). Are sanctions effective? A game-theoretic analysis. Journal of Conflict Resolution, 34, 3–28. CrossRefGoogle Scholar
  42. Tsebelis, G. (1990b). Penalty has no impact on crime: A game-theoretic analysis. Rationality and Society, 2, 255–286. CrossRefGoogle Scholar
  43. Tsebelis, G. (1993). Penalty and crime: Further theoretical considerations and empirical evidence. Journal of Theoretical Politics, 5, 349–374. CrossRefGoogle Scholar
  44. 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. CrossRefGoogle Scholar
  45. Walker, M., & Wooders, J. (2001). Minimax play at Wimbledon. American Economic Review, 91, 1521–38. Google Scholar
  46. Yaniv, G. (2001). Revenge, tax informing, and the optimal bounty. Journal of Public Economic Theory, 3, 225–233. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Department of EconomicsEberhard Karls UniversityTübingenGermany

Personalised recommendations