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A Sequential Stackelberg Game for Dynamic Inspection Problems

Cristobal Guzman, Javiera Riffo, Claudio Telha and Mathieu Van Vyve
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Mathieu Van Vyve: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2021036, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We introduce an inspection game where one inspector has the role ofmonitoring a group of inspectees. The inspector has the resources to visit only a few of them. Visits are performed sequentially with no repetitions. The inspectees report and share the sequence of inspections as they occur, but otherwise, they do not cooperate. Our paper focuses on the mathematical structure of the equilibria of this sequential inspection game, where the inspector can perform exactly two visits. We formulate two Stackelberg models, a static game where the inspector commits to play a sequence of visits announced at the start of the game, and a dynamic game where the second visit will depend on who was visited previously. In the static game, we characterize the (randomized) inspection paths in equilibrium using linear programs. In particular, these inspection paths are solutions to a transportation problem. We use this equivalence to determine an explicit solution to the game and to show that set of inspection path probabilities in equilibrium, projected onto its first and second visit marginals, is convex. In the dynamic game, we determine the inspection paths in equilibrium using backward induction. We discuss how the static and dynamic games relate to each other and how to use these models in practical settings.

Keywords: Game Theory; Inspection Games; Sequential Stackelberg Games (search for similar items in EconPapers)
Pages: 34
Date: 2021-12-03
New Economics Papers: this item is included in nep-gth and nep-ore
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