A business that can’t lose: Investing in attacks against the Colombian power grid

Carlos Barreto, Alvaro A. Cardenas, Jennifer Holmes, Agustin Palao and Juan Carlos Restrepo

International Journal of Critical Infrastructure Protection, 2019, vol. 26, issue C

Abstract: In 2005 a company in charge of repairing electric transmission towers made a deal with guerrilla militants to demolish the towers. This company thrived, because the attacks were attributed to guerrilla groups, who commit these attacks often. However, the number of attacks increased significantly, raising alarms and leading to the discovery of the plot. We model this situation as a game between contractors and the power transmission company, and show how misaligned incentives enabled contractors to profit by colluding with guerrilla groups. We also analyze how to modify the contractual policies reducing the incentives to collude with guerrillas. In particular, the transmission company can prevent attacks by creating competition and exploiting market inefficiencies.

Keywords: Security transmission lines; Power systems; Contracts; Economics; Game theory; Mechanism design (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijocip:v:26:y:2019:i:c:s1874548218301781

DOI: 10.1016/j.ijcip.2019.05.006

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