Strategic crackdown on organized crime by local governments

Abstract

This study examines strategic crackdown policies on organized crime between states or nations. In particular, we consider how organized crimes in different regions can affect optimal sanctions for local governments, which face the problem of coordination failure. We demonstrate how the strategic relation between organized crime groups (i.e., complementarity or substitution) affects the strategic relationship between local governments with respect to crackdowns on organized crime. We also demonstrate that if organized crime groups’ activities complement each other, the equilibrium sanction level without coordination is lower than the first-best sanction level with coordination and that if organized crime groups’ activities substitute each other, the equilibrium sanction level without coordination is higher than the first-best sanction level with coordination.