I would assume AVIS worked out the 5,000 bonus miles based on average profit levels across all rentals. When they used that measurement to inform policy, they violated an implicit assumption of their metric derived model. This is quite literally Goodhart's law: "When a measure becomes a target, it ceases to be a good measure" https://en.wikipedia.org/wiki/Goodhart%27s_law

I also think you've got it entirely backwards to call OP crazy... he was not the person who built the system, but rather was exceptionally sane in responding to the incentives AVIS created (assuming he earns less than ~$2k/day). The only improvement I can see beyond simply renting more cars would be hiring someone to do the manual work of opening and closing his AVIS contracts.... well, that and selling miles for 1 euro-cent a pop.

I have a name for what you're trying to talk about: "policy-created arbitrage", and I agree this is a great example. To me the issue was not people flooding the market with cheap mortgages in 04-08, but rather that pension funds and AIGFP were so willing to buy. Why where they buying? It's too long to cover in an HN comment, but the repeating pattern is substituting ground-level intelligence for top-down rules, and creating those rules in violation of Goodhart's law.