Criminal Property Rights Suppress Violence in Urban Drug Markets: Theory and Evidence from Merseyside, U.K

In this work, we provide empirical evidence on organized criminal groups' (OCGs) behavior across the Liverpool area in the U.K. (Merseyside). We find that violent crimes concerning OCGs concentrate in the areas yielding the highest revenue, while OGCs primarily control areas yielding middle or low revenue. We explain and generalize these empirical observations with a theoretical model examining how OCGs strategically select which area to exploit based on expected revenue and the presence of other OCGs. We prove our results for three OCGs analytically and extend them to larger numbers of OCGs through numerical simulations. Both approaches suggest that, when the frequency of OCG activity is sufficiently high, each OCG controls one area, while the violence between OCGs remains low across all areas. When the frequency of OCG activity reduces, violent collisions between OCGs occur in the areas yielding the highest revenue, while some OCGs retain control over the medium-revenue areas. Our results suggest important policy recommendations. Firstly, if interventions are only violence-driven, they might miss critical underlying factors. Secondly, police operations might have unintended negative externalities in other areas of a city when they target criminal property rights, like increased violence in the areas yielding the highest revenue.