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Illicit trade in tobacco is a substantial and growing problem in the U.S., causing loss of tax revenue, damage to public health, and threats to public safety. Decisions about enforcement against ITTP involve tradeoffs among competing objectives. Good policy design can improve the terms of those tradeoffs but cannot eliminate them. We examine questions about the allocation of enforcement resources against ITTP, and its distribution across activities, individuals, and organizations: in particular, whether and how to differentially target ITTP that involves violence or support for terrorism. We consider the problem of developing effective strategies for enforcement, applying both lessons from experience with markets for illicit drugs and theoretical insights about enforcement targeting and dynamic concentration. We show that targeted enforcement and focused deterrence are more efficient than unfocused enforcement, and that – when other policy changes increase the potential rewards to illicit activity – enforcement resources applied earlier (before illicit markets have grown) will have greater impact than enforcement resources applied later (and therefore to larger markets). We discuss additional considerations, ranging from real-world complications left out of the simple models to examination of how insights from behavioral law and economics may modify conclusions based on a theory of deterrence designed for homo economicus.

Targeted Enforcement Against Illicit Trade in Tobacco Products