Should drug policy be aimed at cartel leaders? Breaking down a peaceful equilibrium
AbstractExperience from the last decade in Colombia and Mexico suggests that violence increases when governments achieve their objective of beheading and fragmenting drug trafficking organizations (DTOs). In this paper I provide a theoretical framework to understand this behavior. Drawing elements from industrial organization, I model DTOs as firms that collude by not attacking each other in order to increase their profits. DTOs always collude when they interact repeatedly; thus, previous analyses focusing on a static Nash equilibrium miss an important part of the dynamics between DTOs. I show that a peaceful equilibrium arises if there are only a few DTOs that care enough about the future. Policies resulting either in a larger number of DTOs or in more impatient leaders increase violence between DTOs without reducing supply. On the other hand, policies that reduce the productivity of DTOs, without directly attacking their leaders and fragmenting them, are more desirable since they can curb supply, although this comes at the cost of increased violence if the elasticity of demand is below a certain threshold. I calculate this threshold, which is a refinement of the value suggested by Becker et al. (2006) for consumer markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 011471.
Date of creation: 27 Aug 2013
Date of revision:
Contact details of provider:
War on Drugs; Illegal Drug Markets; Violence; Supply Reduction;
Find related papers by JEL classification:
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-06-02 (All new papers)
- NEP-IND-2014-06-02 (Industrial Organization)
- NEP-LAW-2014-06-02 (Law & Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Universidad De Los Andes-Cede).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.