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An extortionary guerrilla movement
Author(s) -
Offstein Norman
Publication year - 2007
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.962
Subject(s) - econometrics , stochastic game , extortion , economics , pipeline (software) , movement (music) , payment , discounting , operator (biology) , mathematical economics , microeconomics , computer science , finance , philosophy , biochemistry , chemistry , repressor , political science , transcription factor , law , gene , programming language , aesthetics
Abstract This paper models an extortionary relationship between a pipeline operator and a guerrilla movement. Payment and attack decisions are modeled as an infinite‐horizon Markov decision process, where each period the oil company chooses to pay or not pay an extortion demand and the movement decides to attack or not. Decisions depend on the level of single‐period payoff and discounted expected future payoffs. We estimate the model with pipeline attack data and compare parameters when the discount factor is changed. We reject a zero discount factor hypothesis, demonstrating that the movement's observed attack pattern is compatible with extortionary behavior. Copyright © 2007 John Wiley & Sons, Ltd.