Inspection Policy of a Port State Control Authority

A port State control authority (PSCA) undertakes inspections to enforce that ships visiting its ports meet the required standards. By doing so, the PSCA wants to reduce the frequency of shipping accidents and to minimize expected social loss in its territorial water. Due to resources constraints, port States control authorities realize it impractical to inspect all the ships. The general approach taken by them is to set overall inspection rates to ensure that a certain number of ships are inspected, and use targeting factors to focus resources on those ships most likely to be substandard. In this paper, the authors use a Stackelberg game to model a PSCA's problem of setting an overall inspection rate. Then, based on mechanism design theory, they propose an inspection scheme which can help the PSCA to differentiate between good and substandard ships. Their results can help port States control authorities to design inspection policies at their waters under various circumstances.