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Unlawful Activities: Microeconomic Analysis of Illegal Firms
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Research on corrupt and criminal activity has been of particular interest among social scientists for over three decades. This paper examines in terms of a simple micro-theoretic exercise an illegal firm’s decision-making behaviour. Simple models of a profit maximizing illegal industrial firm are set up and conditions under which illegalisation of work and production occur are derived. Moreover, we explore the cases of detection of the firm at different phases of its production process and also assess the impact of deterrence, if any, on the scale of illegal activity.
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