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Empire-building and Price competition

  • Pietri, Antoine
  • Tazdaït, Tarik
  • Vahabi, Mehrdad

This paper is among the first to theoretically examine the relevance of price competition in the protection market by focusing on the competition between empires. By distinguishing absolute and differential protection rents, we first define coercive rivalry and price competition among empires and then establish three types of empires: early empires of domination (like Akkadian empire), territorial empires (like Russian empire), and merchant empires (like Venetian empire). Empires are structured on the basis of two types of hierarchies that determine their protection costs: ‘top-down’ and ‘bottom-up.’ We systematically study the impact of asymmetrical protection costs on price competition in the light of Bertrand equilibria. We provide an economic rationale for the use of violence throughout history in conformity with the findings of economic historians.

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File URL: https://mpra.ub.uni-muenchen.de/48225/1/MPRA_paper_48225.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48225.

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Date of creation: Mar 2013
Date of revision: Apr 2013
Handle: RePEc:pra:mprapa:48225
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  8. Mehrdad Vahabi, 2004. "The Political Economy of Destructive Power," Books, Edward Elgar Publishing, number 3481.
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  16. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
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