Optimal Dynamic Inspection

Paper: http://zhaochangtau.weebly.com/uploads/1/0/8/4/108458087/repeated_inspection.pdf

We study a discounted repeated inspection game with two agents and one principal. Both agents may profit by violating certain rules, while the principal can inspect at most one agent in each period, inflicting a punishment on an agent who is caught violating the rules. The goal of the principal is to minimize the discounted number of violations, and he has a Stackelberg leader advantage. We characterize the principal's optimal inspection strategy.  

Joint work with Eilon Solan.