Hierarchy in Anarchy

In a criminal organisation, a leader is not protected by laws: the agents in the organisation can depose him or her by starting a mutiny. In this paper, I study, by means of a game-theoretical model, how the distribution of the organisation’s profits is affected by the threat of mutiny. Leaders who give higher wages are better able to incentivise agents to not mutiny. Furthermore, in larger organisations, leaders will offer lower wages even though agents are more eager to mutiny, which results in mutinies occurring more often. Additionally, leaders who make higher profits will offer higher wages and therefore face fewer mutinies.