Predatory equilibria: Systematic theft and its effects on output, inequality and long-run growth

We present a model in which agents can devote energies to production or to appropriating the fruits of other people’s labour. We investigate the situations under which such transfers are equilibria, i.e. will reproduce themselves over time. We note that many of worst outcomes can be observed when players are relatively evenly matched and when the social environment makes predatory activity very successful. In these situations we may even see economic collapse. The introduction of property rights has many of the expected effects, with rewards to productive activity increasing. Nevertheless these gains materialise only if the protection is stronger in areas where the more productive player has a comparative advantage. It is possible to achieve more cooperative outcomes in the repeated game, but paradoxically this might lead to higher levels of income transfers.