Fairness and compliace in the extortion game (original) (raw)
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Extortion Aversion and Optimal Law Enforcement ∗
2019
Extortion is a particularly pernicious form of corruption because it undermines incentives to avoid offenses (Khalil, Lawaree and Sun, 2010). This paper models a law enforcement setting in which enforcement officials can extort innocent subjects and take bribes from guilty ones. We identify salutary effects of a differential moral aversion to extortion vs. bribery on the part of both potential offenders and officials. Even though extortion can arise once an official engages with an innocent subject and even though officials choose their own enforcement policy – including monitoring, prosecuting, and eliciting bribes – we find that a greater aversion to extortion vs. bribery leads to a zero probability of extortion when the social planner chooses an optimal number of enforcing officials. The differential extortion aversion makes the prosecution of guilty offenders more profitable to officials than the prosecution of innocent ones. Provided officials have sufficiently little slack – t...
Resisting the extortion racket: an empirical analysis
European Journal of Law and Economics, 2018
In this paper we study the decision of firms operating in areas where organised crime is pervasive to resist the extortion racket. To this purpose we design a case-control study starting from the unique experience of Addiopizzo (AP), an NGO operating in Palermo (Sicily) which, from 2004, invites firms to resist to the racketeers and join a public list aimed at eliciting critical consumption in favour of firms in the list. We study the determinants of the decision to join AP by estimating a two-level logistic regression model. We find that firm's total assets and firm's age have a negative effect on the probability of joining AP, while a higher level of human capital embodied in the firm and a higher number of employees increases such probability. Among the district-level variables, we find that the share of district population reduces the probability to join, while a higher level of socioeconomic development, including education levels, increase the probability. We posit that these results support the hypothesis that the decision to join AP is based on a cost-benefit analysis and discuss policy implications of our results.
Adaptive Dynamics of Extortion and Compliance
PLoS ONE, 2013
Direct reciprocity is a mechanism for the evolution of cooperation. For the iterated prisoner's dilemma, a new class of strategies has recently been described, the so-called zero-determinant strategies. Using such a strategy, a player can unilaterally enforce a linear relationship between his own payoff and the co-player's payoff. In particular the player may act in such a way that it becomes optimal for the co-player to cooperate unconditionally. In this way, a player can manipulate and extort his co-player, thereby ensuring that the own payoff never falls below the co-player's payoff. However, using a compliant strategy instead, a player can also ensure that his own payoff never exceeds the co-player's payoff. Here, we use adaptive dynamics to study when evolution leads to extortion and when it leads to compliance. We find a remarkable cyclic dynamics: in sufficiently large populations, extortioners play a transient role, helping the population to move from selfish strategies to compliance. Compliant strategies, however, can be subverted by altruists, which in turn give rise to selfish strategies. Whether cooperative strategies are favored in the long run critically depends on the size of the population; we show that cooperation is most abundant in large populations, in which case average payoffs approach the social optimum. Our results are not restricted to the case of the prisoners dilemma, but can be extended to other social dilemmas, such as the snowdrift game. Iterated social dilemmas in large populations do not lead to the evolution of strategies that aim to dominate their co-player. Instead, generosity succeeds.
Extortion subdues human players but is finally punished in the prisoner's dilemma
Nature communications, 2014
Extortion is the practice of obtaining advantages through explicit forces and threats. Recently, it was demonstrated that even the repeated prisoner's dilemma, one of the key models to explain mutual cooperation, allows for implicit forms of extortion. According to the theory, extortioners demand and receive an excessive share of any surplus, which allows them to outperform any adapting co-player. To explore the performance of such strategies against humans, we have designed an economic experiment in which participants were matched either with an extortioner or with a generous co-player. Although extortioners succeeded against each of their human opponents, extortion resulted in lower payoffs than generosity. Human subjects showed a strong concern for fairness: they punished extortion by refusing to fully cooperate, thereby reducing their own, and even more so, the extortioner's gains. Thus, the prospects of extorting others in social relationships seem limited; in the long ...
The Extortion Relationship: A Computational Analysis
Journal of Artificial Societies and Social Simulation
Systematic extortion involves a long term parasitic relationship between the criminal and the victim. Game theory analysis has provided insight into the choices of individual hypothetical criminal and victim pairs. In this paper we present an agent-based model so as to extend the analysis to the relationship between extorters and other potential victims. The model is developed in two stages, the first to be closest to game theory, the second one making the decision informed by the social environment of the victim. The agent-based model shows the importance of social aspects for the functioning of extortion rackets.
The Economics of Repeated Extortion
SSRN Electronic Journal, 2000
This paper provides a simple model of repeated extortion. In particular, we ask whether corrupt government officials' opportunism to demand more once entrepreneurs have made sunk investments entails further distortion in resource allocations. If the choice of technology is left to the entrepreneurs, the dynamic path of demand schedules will induce entrepreneurs to pursue a "flyby-night" strategy by adopting a technology with an inefficiently low sunk cost component. The unique equilibrium is characterized by a mixed strategy of the government official in future demand.
Humans choose representatives who enforce cooperation in social dilemmas through extortion
Nature communications, 2016
Social dilemmas force players to balance between personal and collective gain. In many dilemmas, such as elected governments negotiating climate-change mitigation measures, the decisions are made not by individual players but by their representatives. However, the behaviour of representatives in social dilemmas has not been investigated experimentally. Here inspired by the negotiations for greenhouse-gas emissions reductions, we experimentally study a collective-risk social dilemma that involves representatives deciding on behalf of their fellow group members. Representatives can be re-elected or voted out after each consecutive collective-risk game. Selfish players are preferentially elected and are hence found most frequently in the 'representatives' treatment. Across all treatments, we identify the selfish players as extortioners. As predicted by our mathematical model, their steadfast strategies enforce cooperation from fair players who finally compensate almost complete...
Transparency and Altruistic Punishment in an Experimental Model of Cooperation to Corruption Through Economic Games, 2024
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