Conference Agenda

We extend the canonical 2 × 2 inspection game to a 3 × 3 framework that allows strategic non-compliance and an inspection-quality choice, and test it in nine laboratory sessions (164 subjects) in India, Singapore, and Kazakhstan. Static evidence confirms the Harrington Paradox: firms comply far more than risk-neutral theory predicts, yet Boards choose the cheap, low-detection audit in over 60% of rounds. Dynamic logit and multinomial specifications reveal four mechanisms. First, strong inertia: current compliance is the strongest predictor of future compliance. Second, inspection quality matters but only briefly. Thorough inspections raise compliance on impact and the effect dissipates within approximately three rounds. Third, cursory audits have no immediate effect; in longer-lag models their positive association with compliance is consistent with behavioral inertia rather than direct deterrence. Fourth, punishment works slowly: individual fines are insignificant on impact, while a history of fines has a modest cumulative influence, indicating graduated deterrence. Moral framing partially counteracts the compliance drop caused by strategic complexity, and country/demographic controls leave core results unchanged. Together, these findings reconcile the Harrington Paradox: sticky firm behavior sustains excess compliance, whereas fading inspection salience and the prevalence of cheap cursory audits generate under-enforcement. Policy-wise, improving inspection quality, rather than increasing frequency or fine size, yields the highest marginal deterrence when regulators face capacity constraints and firms can game detection technologies.

Voluntary adoption of sustainable practices is essential for addressing environmental problems such as marine pollution and ghost fishing caused by abandoned, lost, or discarded fishing gear (ALDFG). Yet sustaining compliance within voluntary agreements remains a key challenge. This study uses laboratory experiments to assess refundable deposit mechanisms that promote the adoption of biodegradable fishing gear. Participants were assigned to one of four treatments: a baseline with no agreement, a no-deposit agreement, an agreement with partially deterrent deposits, and an agreement with fully deterrent deposits. Agreements formed only if a minimum participation threshold was met, and deposits were refunded only when members fulfilled their commitments. Results reveal a trade-off between participation and compliance: no-deposit agreements form more frequently but yield lower adoption. Deposit-refund mechanisms improve compliance and adoption, with the fully deterrent deposit treatment performing best, particularly among large players. These findings underscore the importance of incentive-compatible enforcement in designing effective voluntary environmental programs.

This paper examines how disruptions in environmental monitoring reshape the behavior of both regulators and polluters in China. Leveraging outages in China’s national air quality monitoring network as a natural experiment, we find an 11% increase in SO2 emissions from polluters near affected air quality monitors, with emissions surging during outages and normalizing after monitoring recovery. Using geo-coded inspection records, we show that inspection intensity rises with observed pollution but drops sharply when monitoring fails. These results reveal coordinated behavioral shifts: local regulators retreat from enforcement, while firms exploit weakened oversight to emit more. Our findings highlight how transient information asymmetry destabilizes regulatory enforcement, facilitating a shift from static compliance to mutually reinforcing strategic behavior between local regulators and polluters.