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Empire-building and Price competition

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  • Pietri, Antoine
  • Tazdaït, Tarik
  • Vahabi, Mehrdad

Abstract

This paper is among the first to theoretically examine the relevance of price competition in the protection market by focusing on the competition between empires. By distinguishing absolute and differential protection rents, we first define coercive rivalry and price competition among empires and then establish three types of empires: early empires of domination (like Akkadian empire), territorial empires (like Russian empire), and merchant empires (like Venetian empire). Empires are structured on the basis of two types of hierarchies that determine their protection costs: ‘top-down’ and ‘bottom-up.’ We systematically study the impact of asymmetrical protection costs on price competition in the light of Bertrand equilibria. We provide an economic rationale for the use of violence throughout history in conformity with the findings of economic historians.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48225.

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Date of creation: Mar 2013
Date of revision: Apr 2013
Handle: RePEc:pra:mprapa:48225

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Keywords: Absolute and differential protection rents; Bertrand equilibrium; Empires of domination; Merchant empires; Territorial Empires;

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  1. Kai Konrad & Stergios Skaperdas, 2012. "The market for protection and the origin of the state," Economic Theory, Springer, vol. 50(2), pages 417-443, June.
  2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  3. Richard E. Levitan & Martin Shubik, 1970. "Price Duopoly and Capacity Constraints," Cowles Foundation Discussion Papers 287, Cowles Foundation for Research in Economics, Yale University.
  4. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
  5. Wittman, Donald, 1991. "Nations and States: Mergers and Acquisitions; Dissolutions and Divorce," American Economic Review, American Economic Association, vol. 81(2), pages 126-29, May.
  6. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
  7. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  8. Friedman, David, 1977. "A Theory of the Size and Shape of Nations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 59-77, February.
  9. Ames, Edward & Rapp, Richard T., 1977. "The Birth and Death of Taxes: A Hypothesis," The Journal of Economic History, Cambridge University Press, vol. 37(01), pages 161-178, March.
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