Narcos is an American television show released in 2015. The crime drama is based on the story of notorious drug kingpin Pablo Escobar, who became a billionaire by organizing the production and distribution of cocaine in the 1970s. Narcos was filmed in Columbia and showcased both English and Spanish languages.
Concepts: Cartel, oligopolies, regional monopoly
Background: Pablo Escobar calls a meeting with all local kingpins to urge them to form a coalition. Escobar offers to retain control of day-to-day activities. The other kingpins provide funding while receiving profits and security.
Question: How do you call such formal collusive behavior? Explain the reasons why Escobar and other kingpins agreed to market sharing.
Concepts: Shift of supply curve, inelastic demand, monopsony power
Background: With the help of US resources and intel, the Colombian military police destroyed cocaine labs all over the country, burning coca farms and seizing over a billion dollars in cocaine.
Question: Use a supply and demand diagram to explain why the US and Colombian governments sought to destroy labs and crops. Discuss the effectiveness of governments’ interventions.
Concepts: Game theory, Nash equilibrium
Background: In this clip, the Colombian government cooperates with the DEA to capture Pablo Escobar and dismantle the Medellin cartel. Both governments plan to sign an extradition treaty, allowing drug lords to be prosecuted under American law. Threatened by the extradition, Pablo Escobar decides to attack the Colombian Palace of Justice.
Question: Create a payoff matrix, modeled on a Hawk-Dove game, to depict the Colombian government and the Medellin cartel’s strategies. What is each player’s dominant strategy? What is the Nash equilibrium of the game?
Background: In Narcos, we see several stacks of dollar bills hidden in various places. Drug dealers must hold a lot of dollar bills, to avoid depositing the money into banking accounts and risking being reported to the government.
Question: Find the most recent amount of US currency in circulation per capita. Are all US dollar bills in the US? To answer this question, you may use the currency and population values from the FRED website: https://fred.stlouisfed.org/.