Is piracy sustainable?

Jean-Pierre Laffargue () and Kenneth Chan
Additional contact information
Jean-Pierre Laffargue: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We develop a model of international trade between three countries, one of which hosts pirates. When the number of pirate ships increases, the probability for one of the pirate ships (for one commercial ship) encountering a commercial (pirate) ship decreases (increases). Then, the commercial ships have an incentive to spend more on defense and pirate ships to invest less on attack. If pirates operate under free entry, they do not internalize the entry externality. Then, their number rises until it reaches a level such that their attack power has become negligible and the defense of the commercial ships has reached a high level. The economy settles in a full deterrence equilibrium. However, if the number of pirate ships is controlled by an authority, which maximizes their total profit, the economy settles in an equilibrium where piracy is active and commercial ships spend less on defense. Piracy is a substitute for trade. Piracy depends on the terms of trade of the pirate country and on the relative efficiency of the attack versus the defense.

Date: 2020-02
References: Add references at CitEc
Citations:

Published in Canadian Journal of Economics / Revue Canadienne d'Économique, 2020, 53 (1), pp.321-340. ⟨10.1111/caje.12427⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Is piracy sustainable? (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-02400507

DOI: 10.1111/caje.12427

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().