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The market for protection and the origin of the state

  • Konrad, Kai A.
  • Skaperdas, Stergios

We examine a stark setting in which security or protection can be provided by self-governing groups or by for-profit entrepreneurs (kings, kleptocrats, or mafia dons). Though selfgovernance is best for the population, it faces problems of long-term viability. Typically, in providing security the equilibrium market structure involves competing lords, a condition that leads to a tragedy of coercion: all the savings from the provision of collective protection are dissipated and welfare can be as low as, or even lower than, in the absence of the state.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 13961.

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Date of creation: 2012
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Publication status: Published in Economic Theory 2 50(2012): pp. 417-443
Handle: RePEc:lmu:muenar:13961
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