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Slippery Fish: Enforcing Regulation when Agents Learn and Adapt

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Abstract

Attempts to curb undesired behavior through regulation gets complicated when agents can adapt to circumvent enforcement. We test a model of enforcement with learning and adaptation, by auditing vendors selling illegal "sh in Chile in a randomized controlled trial, and tracking them daily using mystery shoppers. Conducting audits on a predictable schedule and (counter-intuitively) at high frequency is less e"ective, as agents learn to take advantage of loopholes. A consumer information campaign proves to be almost as cost-e"ective and curbing illegal sales, and obviates the need for complex monitoring and policing. The Chilean government subsequently chooses to scale up this campaign.

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  • Andr's Gonz'lez Lira & Ahmed Mushfiq Mobarak, 2018. "Slippery Fish: Enforcing Regulation when Agents Learn and Adapt," Cowles Foundation Discussion Papers 2143R, Cowles Foundation for Research in Economics, Yale University, revised Mar 2021.
    • Handle: RePEc:cwl:cwldpp:2143r
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    Cited by:

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    3. Liang, Yuanning, 2023. "Do Safety Inspections Improve Safety? Evidence from the Roadside Inspection Program for Commercial Vehicles," 2023 Annual Meeting, July 23-25, Washington D.C. 335618, Agricultural and Applied Economics Association.
    4. Vieira, João Pedro & Dahis, Ricardo & Assunção, Juliano, 2023. "From Deforestation to Reforestation: The Role of General Deterrence in Changing Farmers' Behavior," SocArXiv vqpkm, Center for Open Science.

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    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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