Regulation cost combination model: an approach to Mexican SMEs from 2003-2019

A regulation cost combination model (RCCM) was used to explain the regulatory functioning of Mexican industrial organizations, highlighting the role of small and medium-sized enterprises (SMEs) from 2003-2009. A model is developed based on the combinatorial theory that allows evaluation of the changes to be made in the regulations to reduce evasive behaviour by agents and provides a framework for the net social benefit (NSB) that companies obtain according to their size. A regulation cost factor (RCF) is built that interacts with the number of supervisors, the regulation process, and its costs compared to the NSB. A first analysis of the results of regulatory management is not advisable because efforts to guarantee efficient compliance generate high costs that are difficult to evaluate in the context of trade-offs concerning the improvement of the NBF; however, the development of these costs is theoretical and allows us to conclude that less rigorous but effective regulations favour SMEs since they allow them to reduce their cost structure to maximize their NSB.