Extortion as an obstacle to economic growth: A dynamic game analysis
AbstractIn this paper we use a differential game analysis to study the dynamic strategic interaction between a criminal gang extorting money from local shop- owners and the police force. In particular, we are interested in characterizing which factors are important in determining whether the capital stock of local shop-owners keeps growing in spite of extortion or the criminal activity leads to a phase of stagnation of the local economy. A Markov perfect equilibrium of the game is characterized in order to address this question and several policy implications are derived to facilitate growth in regions affected by extortion.
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Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 157.
Date of creation: 01 Apr 2001
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Web page: http://www.econometricsociety.org/conference/SCE2001/SCE2001.html
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Extortion; Differential games; capital accumulation;
Other versions of this item:
- Dawid, H. & Feichtinger, G. & Novak, A., 2002. "Extortion as an obstacle to economic growth: a dynamic game analysis," European Journal of Political Economy, Elsevier, vol. 18(3), pages 499-516, September.
- Herbert Dawid & Gustav Feichtinger & Andreas Novak, 2001. "Extortion as an Obstacle to Economic Growth: A Dynamic Game Analysis," Game Theory and Information 0012003, EconWPA.
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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