The use of costless inspection in enforcement

The process whereby a reluctant decisionmaker may be induced to behave in accordance with a rule, regulation, or law, is examined in a general context. It is assumed that an enforcement agency can make use of a costless inspection process, which would provide a free, but possibly inaccurate, assessment of the subject's behavior. The agency also has some power of punishment. When should evidence be collected by the agency, and how should it be used? How can an enforcement system be structured so as to maximize the level of compliance? How does compliance depend on the subject's private gain for violation, the level of punishment, the risk of errors (of both kinds) in the inspection report, and other parameters? These questions and others are addressed using non-cooperative game models. Answers give new insights into real-world enforcement problems in areas as diverse as environmental regulation and arms control.