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A Strategic Analysis of Narcoterrorism: Counterterrorism, Terrorist Extortion, and Illicit Drug Trafficking

Author

Listed:
  • Subhayu Bandyopadhyay
  • Todd Sandler

Abstract

The paper presents a novel strategic analysis of narcoterrorism where a developing country’s terrorist group extorts home drug farmers to finance terror attacks. A developed country’s counterterror actions are motivated by the harm its residents endure from those attacks. The developed country’s counterterrorism involves efforts to destroy the drug crop abroad. The analysis begins with the drug price being exogenously fixed, followed by a “large-country case’’ with a market-determined drug price. The extension introduces a fourth participant, consisting of the developed country’s consumers whose purchases determine the drug demand. A subsequent extension allows for two drug-exporting countries along with their resident terrorist groups. Now, the drug price depends on terrorist extortion rates and the developed country’s counterterrorism associated with the two drug-exporting countries. With the last extension, novel drug-based counterterror transfers of terrorism occur between the drug-producing countries.

Suggested Citation

  • Subhayu Bandyopadhyay & Todd Sandler, 2025. "A Strategic Analysis of Narcoterrorism: Counterterrorism, Terrorist Extortion, and Illicit Drug Trafficking," Working Papers 2025-032, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:102108
    DOI: 10.20955/wp.2025.032
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    References listed on IDEAS

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    1. Bandyopadhyay, Subhayu & Gaibulloev, Khusrav & Sandler, Todd, 2025. "Immigration from a terror-prone nation: Destination nation's optimal immigration and counterterrorism policies," Economic Modelling, Elsevier, vol. 143(C).
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    9. Khusrav Gaibulloev & Todd Sandler, 2019. "What We Have Learned about Terrorism since 9/11," Journal of Economic Literature, American Economic Association, vol. 57(2), pages 275-328, June.
    10. Khusrav Gaibulloev & James A. Piazza & Todd Sandler, 2024. "Do Failed or Weak States Favor Resident Terrorist Groups’ Survival?," Journal of Conflict Resolution, Peace Science Society (International), vol. 68(5), pages 823-848, May.
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    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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