CFDP Revision Date
Journal of Economic Literature (JEL) Code(s)
K42, O1, L51
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 ﬁsh 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 effective, as agents learn to take advantage of loopholes. A consumer information campaign proves to be almost as cost-effective and curbing illegal sales, and obviates the need for complex monitoring and policing. The Chilean government subsequently chooses to scale up this campaign.
Gonzalez Lira, Andres and Mobarak, Ahmed Musfiq, "Slippery Fish: Enforcing Regulation when Agents Learn and Adapt" (2018). Cowles Foundation Discussion Papers. 2607.