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Extortion as an obstacle to economic growth: A dynamic game analysis

H. Dawid, G. Feichtinger, A. Novak
Authors registered in the RePEc Author Service: Gustav Feichtinger and Herbert Dawid

No 157, Computing in Economics and Finance 2001 from Society for Computational Economics

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 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.

Keywords: Extortion; Differential games; capital accumulation (search for similar items in EconPapers)
JEL-codes: C73 D92 K42 (search for similar items in EconPapers)
Date: 2001-04-01
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