MOTIVATING EXAMPLE
                                                              2
       Employee Actions: {Behave, 
       Violate}
     AUDIT PROCESS EXAMPLE
           Reward Organization:                                -6
                                   Behave            Violate
           Rounds:                                                         3
               Ignore                   0                -5
           Reward  of Best Expert (hindsight):          -3
               Investigate              -1               -1
           Regret :                                       (-3) -(-6) = 3
           Average Regret:                                           1 
      Game proceeds in rounds
                     Round 1         Round 2        Round 3        …
      Employee       Behave          Violate        Violate        …
      Organization   Ignore          Ignore         Investigate    …
      Expert         Investigate     Investigate    Investigate    …
      Outcome:       No Violation    Missed V       Detected V            3
      Reward:        0               -5             -1             …
    TALK OUTLINE
    Motivation
    Bounded Memory Game Model
    Defining Regret
    Regret Minimization in Bounded Memory Games
       Feasibility
       Complexity
                                                        4
    ELEMENTS OF GAME MODEL
    Two Players: 
       Adversary (Employee) and Defender (Organization)
    Actions:
       Adversary Actions: {Violate, Behave}
       Defender Actions: {Investigate, Ignore}
    Repeated Interactions
       Each interaction has an outcome 
       History of game play is a sequence of outcomes
    Imperfect Information:
       The organization doesn’t always observe the actions of 
        the employee
                                                        5
        Could be formalized as a repeated game
    ADDITIONAL ELEMENTS OF GAME 
    MODEL 
    Move to richer game model
     o History-dependent Rewards:
       o Save money by ignoring
       o Reputation possibly damaged if we Ignore and the 
        employee did violate
        o Reputation of the organization depends both on its 
          history and on the current outcome 
     o History-dependent Actions:
      o Players’ behavior may depend on history
                                                        6
      o Defender’s behavior may depend on complete history