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Extortion as an Obstacle to Economic Growth: A Dynamic Game Analysis

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Author Info
Herbert Dawid (University of Southern California)
Gustav Feichtinger (Vienna University of Technology)
Andreas Novak (University of Vienna)

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Abstract

In 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 local 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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File URL: http://129.3.20.41/eps/game/papers/0012/0012003.pdf
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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 0012003.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 25 pages
Date of creation: 23 Jan 2001
Date of revision:
Handle: RePEc:wpa:wuwpga:0012003

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 25; figures: included
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Web page: http://129.3.20.41

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Related research
Keywords: Extortion; Differential Games; Capital Accumulation;

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Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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This page was last updated on 2009-12-2.

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