Applied Game Theory

In this book I apply a game-theoretic model to analyze coexistence bet­ween organized crime and unaffiliated criminals in the context of union corruption. In case of two theft markets available to the mafia and only one to the criminal, the mafia prefers to coexist with a criminal rather than not have access to that market at all. Further, any increase in the number of individual criminals does not affect the mafia's payoff. I also study the recruitment of criminals as informants in the presence of prosecution threat and mafia-criminal theft cooperation. I find that criminals receiving exogenous compensation for cooperative thefts exert the highest level of cooperation with law enforcement. In the final chapter of this book I use game theory to show support for piece-rate compensation for Hollywood actors. Support for such a proposal is also shown using personnel economics research. Industry data shows that piece-rate compensation may already be in place for successful actors which may relate to producers avoiding high fixed costs or actors realizing higher returns.