This paper examines optimal fines in a regulatory framework where the regulator can choose either surprise or announced inspections to monitor a firm for compliance. The firm can invest in detection avoidance, but it receives a fine if the regulator discovers that it is non-compliant. In the...

Basu (1994) argues that claims above the Nash equilibrium in the Traveler's Dilemma may be an equilibrium in a model where rational players use reasoning in ill-defined categories. In this model, players may form beliefs over ill-defined strategies such as "choosing a high claim" and best...