The Upper Risk of an Inspection Agreement

Published Online:https://doi.org/10.1287/opre.40.5.877

An inspection agreement, contained within a treaty proposal, determines a two-person, zero sum game which we call the implicit game. The value of the implicit game, called the upper risk, is an important parameter of the agreement. The upper risk and other parameters in the solution of the implicit game are useful for evaluating the proposal and comparing it to other proposals. The purpose of this paper is to define the implicit game which arises from an inspection arrangement, define the upper risk and other parameters, and then to illustrate the theory with examples, several of which originated in the analysis of actual inspection proposals.

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