Rewarding policemen increases crime: some more surprising results from the inspection game

Inspection games are 2 × 2 games in which one player must decide whether to inspect the other player, who in turn must decide whether to infringe a norm or a regulation. Inspection games have a single, mixed strategy Nash equilibrium, which has counter-intuitive comparative statics properties. This result has been used by Tsebelis (1989) and Holler (1992) to show that the economic approach to law enforcement is not likely to generate clear-cut predictions. In this paper I discuss a variant of the inspection game in which the inspector can act as a Stackelberg leader. I will also show that this version of the inspection game has counter-intuitive comparative statics properties. In particular, increasing inspector’s incentives to enforce the law increases the frequency of law infractions.