Turf and Illegal Drug Market Competition between Gangs

Naranjo Alberto J. ()
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Naranjo Alberto J.: Department of Economics, Universidad de La Sabana, Puente del Comun, Km 7, Chia 107 32, Colombia

The B.E. Journal of Economic Analysis & Policy, 2015, vol. 15, issue 4, 1507-1548

Abstract: Street-level illegal drug markets generate much of the violence and intimidation that local communities face nowadays. These markets are mainly driven by territorial gangs who finance their activities through the sale of drugs. Understanding how the existence of both turf and drug market competition may have unintended consequences of law enforcement policies on violence is the main contribution of the paper. We propose a two-stage game-theoretical model where two profit maximizing gangs compete in prices and invest in guns. We find that policies such as traditional or community policing can have different and unexpected effects on the level of violence.

Keywords: illicit drugs; violence; switching cost; price discrimination (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/bejeap-2013-0161

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