Vehicle inspections---commonly known as smog and safety checks---are often delegated to private agents, much like other quality certification markets. However, when these agents compete, it can create incentives for misreporting quality. Theory and evidence from Chile's concentrated vehicle-inspection markets show that these incentives respond to a coordination problem so severe that it can only be resolved by delegating each market to a single agent. Doing so compromises neither service quality nor the (ex-ante) competition for the market, while leading to a permanent reduction in vehicle emissions of over 30% in some markets. An alternative to monopoly delegation is to allow more agents into the market while restricting consumer choice: allocating consumers to agents but permitting them to switch providers either by trading "location" allowances or by paying a "switching" tax.

Juan Pablo Montero is a Professor of Economics at the Pontificia Universidad Católica de Chile (PUC-Chile) and a Distinguished Visiting Professor at Aalto University's Business School, and Research Associate at MIT’s CEEPR. He has held visiting positions at the MIT’s Sloan School of Management, the Harvard’s Kennedy School of Government and Stanford’s CLAS and Economics. He received Bachelor and M.Sc. degrees in Civil Engineering from PUC-Chile and M.Sc. and Ph.D. degrees in Economics from MIT. His research work concentrates on industrial organization, environmental and resource economics and has appeared, among others, in the American Economic Review, the Journal of Political Economy, the Review of Economic Studies, and the Journal of the European Economic Association. He is co-author of Markets for Clean Air of Cambridge University Press (joint with Ellerman, Joskow and Schmalensee of MIT). He has been associate editor and in the editorial board of several journals. He has also been a consultant for the Government of Chile, private corporations, and international organizations in topics of competition policy and environmental regulation. In 2007 he was awarded Chilean Economist of the Year by “El Mercurio”, main local newspaper, and in 2019 was named Fellow of the Econometric Society.