Abstract
This paper proposes a simple framework consisting of a law enforcement model in which criminal organizations (Mafias) can collaborate with each other to control an illegal market. Within this framework, we investigate two different situations: (1) a single monopolistic criminal organization operation or (2) an organization collaborating with another criminal organization. Depending on the quality of the controlled illegal market, the welfare implications of these scenarios vary. This paper also investigates an incentive for criminal organizations to engage in endogenous cooperation. As a result, we explore how criminal organizations’ incentives coincide with social welfare implications.
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Notes
According to Gaffy (2017), Nigerian gangs and the Sicilian Mafia collaborated with each other. This report states that Nigerian criminals were used as drug dealers by higher-ranking Italian mobsters. Additionally, gangs have profited from managing the many thousands of Nigerian women trafficked into Italy as sex workers in recent years. Other collaborations between drug cartels and local American gangs have been summarized by Schmidt (2012). American gang alliances with Mexican drug trafficking organizations (MDTOs) is a logical step for gangs in their effort to establish and maintain control over street sales of illegal drugs in many U.S. cities (Schmidt 2012). As a domestic case, Japanese Mafia groups such as Yakuza have cooperated with a new breed of criminal elements referred to as han-gure (Schreiber 2012). The emergence of han-gure may relate to recent police crackdowns on designated crime syndicates with tough new anti-gang strategies. Since Yakuza are now under much closer scrutiny by the police, it can be profitable for them to farm out illegal jobs to such members. In other words, tough approaches by the police toward Yakuza may have created a power vacuum in which the han-gure are likely to be active.
According to Catino (2015), for example, in the Sicilian and American Mafias, several illegal activities are carried out by the following: (1) the Mafia organization; (2) subcontracted groups and criminal cells that are not organic parts of the Mafia organization but that receive a percentage of the earnings; and (3) co-partnerships with other criminal groups and/or other Mafia organizations.
These settings can be applied to analysis of the governance structure of criminal organizations. It has been said that there are two notably different types of governance structures for criminal organizations and markets: (1) a hierarchical and monopolized structure and (2) a decentralized operation. Certain Italian criminal organizations exhibit these different organizational structures. According to Paoli (2014), while the Camorra is said to lack a strong hierarchical structure, other famous Mafia-type criminal organizations, such as the Cosa Nostra and the ‘Ndrangheta, have hierarchical organizational structures that allow them to pursue coordinated organizational benefits. Such organizations are either independent or consist of a confederation of several groups and clans. Other criminal organizations also exhibit these different organizational forms; Japanese criminal organizations, such as the Yakuza, drug cartels in Mexico, pirates and terrorist groups also tend to have an organizational structure that is either centralized or decentralized (Hill 2003; Leeson and Rogers 2012; Shirk and Wallman 2015).
We assume that sanctions are imposed on lower-ranked criminals who engage in a criminal market. This is because the main profits of Mafias are obtained from illegal market control; thus, such sanctions are an important tool for controlling a Mafia’s economic profits.
We use T to denote such “teaming up” situations among collaborative criminal organizations.
Even if we introduce a different way to allocate the total extortion cost between Mafia 1 and Mafia 2, I believe that our main implications do not change dramatically.
However, even if Mafia 1 decides first and then Mafia 2 chooses its strategy, our main intuitions do not change.
To have interior solutions, we assume that the social harm H is not an extreme value. That is, we assume \(max[2\sigma +(1-c_M)/2, 3\sigma +2(1-c_T)/3]<H<min[2\sigma +1-c_M, 3\sigma +1-c_T]\).
We assume that there is no side-payment from Mafia 2 to Mafia 1 to propose a collaboration. However, when considering such monetary transfers, our main results and implications do not change.
Mafia bosses are the most important factors in enforcing their organizations. This is based on the fact that bosses play an important role in ensuring the efficient use of violence (Gambetta 1993), enforcing criminal rules (Leeson and Rogers 2012; Leeson and Skarbek 2010; Catino 2015), and constructing criminal networks (Baccara and Bar-Isaac 2008; Mastrobuoni 2015).
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Acknowledgements
I am grateful to two anonymous referees and editor-in-chief Giovanni B. Ramello. I would also like to thank Koichi Suga and participants in the annual meetings of the European Law and Economics Association, the Asian Law and Economics Association and the Japanese Law and Economics Association for their helpful comments and suggestions.
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Yahagi, K. Law enforcement with criminal organizations and endogenous collaboration. Eur J Law Econ 48, 351–363 (2019). https://doi.org/10.1007/s10657-019-09633-6
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DOI: https://doi.org/10.1007/s10657-019-09633-6