Munich Personal RePEc Archive

Land competition and monopsonistic monopoly: the role of the narco-insurgency in the colombian cocaine market

Omar Fdo., Arias-R. and Alfonso, Aza-Jacome (2015): Land competition and monopsonistic monopoly: the role of the narco-insurgency in the colombian cocaine market.

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Abstract

The main purpose of this paper is to model the role of the narco-insurgency in the structure and functioning of the colombian cocaine market. The narco-insurgency gets important profits from this market by controlling the land for producing coca-leaf, and the production of inputs for trading cocaine. These inputs could be paste or base of cocaine, or even cocaine before trading it to the final consumers. Those profits allow the narco-insurgency to configure and sustain such a market structure that guarantees it to obtain them permanently. We proceed by four steps. First, we model the land conflict between the narco-insurgency and the government. The output of this process is a valuation of the land for producing coca-leaf. The second stage concerns the farmers. By using violence, the narco-insurgency obligates the farmers to participate in the cocaine market as producers of coca-leaf. It charges them a tax for the coca-leaf production, and also it fixes them the coca-leaf price through its monopsonistic power. In the third stage, the narco-insurgency produces those inputs for trading cocaine and sell them monopolistically to cocaine traffickers, which compete each one in an oligopolistic market. The gap between the coca-leaf price and the price of inputs for trading cocaine explains the profits that narco-insurgency obtains from this illegal market.

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