Strategic statutory interpretation by administrative agencies

Many statutes are administered by administrative agencies. This paper shows that, when interpreting an ambiguous statute, administrative agencies choose between two strategies of statutory interpretation: the risky strategy, a relatively aggressive interpretation that provokes an appeal by the firm; and the safe strategy, a relatively nonaggressive interpretation that the firm complies with. The paper also shows that a change in the level of judicial deference may result in a shift from the risky strategy to the safe one, or vice versa. Therefore, contrary to the commonly held view, an increase in the level of judicial deference may result in agencies choosing a less aggressive statutory interpretation, and in more court decisions reversing agencies' statutory interpretation.