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An extortionary guerrilla movement

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  • Norman Offstein

    (J. W. Lock Co., Covina, California, USA)

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    Abstract

    This paper models an extortionary relationship between a pipeline operator and a guerrilla movement. Payment and attack decisions are modeled as an infinite-horizon Markov decision process, where each period the oil company chooses to pay or not pay an extortion demand and the movement decides to attack or not. Decisions depend on the level of single-period payoff and discounted expected future payoffs. We estimate the model with pipeline attack data and compare parameters when the discount factor is changed. We reject a zero discount factor hypothesis, demonstrating that the movement's observed attack pattern is compatible with extortionary behavior. Copyright © 2007 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jae.962
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    File URL: http://qed.econ.queensu.ca:80/jae/2007-v22.6/
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

    Volume (Year): 22 (2007)
    Issue (Month): 6 ()
    Pages: 995-1011

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    Handle: RePEc:jae:japmet:v:22:y:2007:i:6:p:995-1011

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    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Collier, Paul & Hoeffler, Anke & Soderbom, Mans, 2001. "On the duration of civil war," Policy Research Working Paper Series 2681, The World Bank.
    3. Collier, Paul & Hoeffler, Anke, 2000. "Greed and grievance in civil war," Policy Research Working Paper Series 2355, The World Bank.
    4. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, 06.
    5. Patrick Bajari & Han Hong, 2006. "Semiparametric Estimation of a Dynamic Game of Incomplete Information," NBER Technical Working Papers 0320, National Bureau of Economic Research, Inc.
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