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Extortion as an Obstacle to Economic Growth: A Dynamic Game Analysis

Author

Listed:
  • Herbert Dawid

    (University of Southern California)

  • Gustav Feichtinger

    (Vienna University of Technology)

  • Andreas Novak

    (University of Vienna)

Abstract

In this paper we use a differential game analysis to study the dynamic strategic interaction between a criminal gang extorting money from local shop-owners and the local police force. In particular, we are interested in characterizing which factors are important in determining whether the capital stock of local shop-owners keeps growing in spite of extortion or the criminal activity leads to a phase of stagnation of the local economy. A Markov perfect equilibrium of the game is characterized in order to address this question and several policy implications are derived to facilitate growth in regions affected by extortion.

Suggested Citation

  • Herbert Dawid & Gustav Feichtinger & Andreas Novak, 2001. "Extortion as an Obstacle to Economic Growth: A Dynamic Game Analysis," Game Theory and Information 0012003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpga:0012003
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 25; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/game/papers/0012/0012003.pdf
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    2. R.F. Hartl & P.M. Kort & G. Feichtinger, 2003. "Offense Control Taking into Account Heterogeneity of Age," Journal of Optimization Theory and Applications, Springer, vol. 116(3), pages 591-620, March.
    3. Feichtinger, Gustav & Grienauer, Waltraud & Tragler, Gernot, 2002. "Optimal dynamic law enforcement," European Journal of Operational Research, Elsevier, vol. 141(1), pages 58-69, August.
    4. Herbert Dawid & Engelbert Dockner & Richard Hartl & Josef Haunschmied & Ulrike Leopold-Wildburger & Mikulas Luptacik & Alexander Mehlmann & Alexia Prskawetz & Marion Rauner & Gerhard Sorger & Gernot T, 2010. "Gustav Feichtinger celebrates his 70th birthday," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 437-451, December.
    5. Daniele, Vittorio & Marani, Ugo, 2011. "Organized crime, the quality of local institutions and FDI in Italy: A panel data analysis," European Journal of Political Economy, Elsevier, vol. 27(1), pages 132-142, March.

    More about this item

    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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