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An extortionary guerrilla movement


  • Norman Offstein

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


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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  • Norman Offstein, 2007. "An extortionary guerrilla movement," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(6), pages 995-1011.
  • Handle: RePEc:jae:japmet:v:22:y:2007:i:6:p:995-1011
    DOI: 10.1002/jae.962

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    References listed on IDEAS

    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. Paul Collier & Anke Hoeffler & Måns Söderbom, 2004. "On the Duration of Civil War," Journal of Peace Research, Peace Research Institute Oslo, vol. 41(3), pages 253-273, May.
    3. 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, June.
    4. 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.
    5. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
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