Working Paper

A Strategic Analysis of Narcoterrorism: Counterterrorism, Terrorist Extortion, and Illicit Drug Trafficking

Abstract: The paper presents a novel strategic analysis of narcoterrorism where a developing country’s terrorist group extorts home drug farmers to finance terror attacks. A developed country’s counterterror actions are motivated by the harm its residents endure from those attacks. The developed country’s counterterrorism involves efforts to destroy the drug crop abroad. The analysis begins with the drug price being exogenously fixed, followed by a “large-country case’’ with a market-determined drug price. The extension introduces a fourth participant, consisting of the developed country’s consumers whose purchases determine the drug demand. A subsequent extension allows for two drug-exporting countries along with their resident terrorist groups. Now, the drug price depends on terrorist extortion rates and the developed country’s counterterrorism associated with the two drug-exporting countries. With the last extension, novel drug-based counterterror transfers of terrorism occur between the drug-producing countries.

JEL Classification: D74; H56; C72;

https://doi.org/10.20955/wp.2025.032

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2025-11-12

Number: 2025-032