In “Regulating by Incentives,” Professor Malloy argues that the “black-box” model of regulation, which assumes that firms respond to regulator incentives in an economically rational manner, is a precarious foundation on which to build social regulation directed at larger business organizations.  Instead, Malloy proffers a “resource-allocation” model that takes into account the inner workings of business firms.  This “resource-allocation” model treats the firm as a system for allocating and coordinating organizational resources, such as capital, information, and personnel time and expertise.  It likewise characterizes a firm’s response to a regulatory incentive—whether a regulatory obligation or opportunity—as a decision by the firm about how to allocate its limited resources.  Malloy applies the “resource-allocation” model to a hypothetical company to demonstrate the manner in which this model provides a more comprehensive basis on which to analyze and evaluate issues of compliance with regulation.