A model of desertion. From a principal-agent theory perspective

This article studies the nature of the trade-off between incentives and enforcement mechanisms that an Armed Illegal Organization (AIO)'s leadership, which is the principal, offers to its operatives, who act as agents. This principal-agent model focuses on both the expected benefits and costs f...

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Published inCuadernos de economía (Bogotá, Colombia) Vol. 36; no. 70; pp. 19 - 47
Main Authors Castillo Valencia, María Del Pilar, Balbinotto, Giácomo
Format Journal Article
LanguageEnglish
Portuguese
Published Universidad Nacional de Colombia 01.01.2017
Subjects
agent theory
agente
contracts
contratos
ECONOMICS
game theory
Principal
teoría de juegos
Teoría de principal
Théorie de principal agent
teoría de principal-agente
contrats
théorie de jeux
game theory
contratos
teoría de juegos
contracts
Principal-agent theory
teoria de jogos
Teoria de principal-agente
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Summary:This article studies the nature of the trade-off between incentives and enforcement mechanisms that an Armed Illegal Organization (AIO)'s leadership, which is the principal, offers to its operatives, who act as agents. This principal-agent model focuses on both the expected benefits and costs for those who decide to stay or defect from the armed organization, in an uncertain context in which desertion is encouraged by an external agent who is providing incentives aimed at fostering operatives' individual desertion. Given a parameterization of the model, we find the optimal transfer system using the constrained minimization routine fmincon in MATLAB's optimizations toolbox. Once we obtain a numerical version of the contract, we use the computational tool to simulate the behavior of agents who are facing the probability of being punished and how this could encourage agents to not make any effort.
ISSN:0121-4772
2248-4337
DOI:10.15446/cuad.econ.v36n70.44316