The Market for Extortions

Halvor Mehlum, Karl Ove Moene and Ragnar Torvik

No DP2001-26, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: We consider extortion gangs that are mafia-like in their protection of targets, but that are unlike the Mafia in their competition over targets. Does this type of organized crime pay? How are the returns to extortion affected by the number of competing extortionists and the violence they apply? Does the supply of extortions create the demand for protection that the groups live from? In order to answer such questions we analyse a model that focus on the trade-off between congestion and demand creation in the market for extortions.

Keywords: Game theory; Informal sector; Supply and demand (search for similar items in EconPapers)
Date: 2001
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