Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-19T09:23:32.921Z Has data issue: false hasContentIssue false
  • English
  • Français

Shadow markets and hierarchies: comparing and modeling networks in the Dark Net

Published online by Cambridge University Press:  14 January 2018

JULIA R. NORGAARD ,
HAROLD J. WALBERT  and
R. AUGUST HARDY
JULIA R. NORGAARD*
Affiliation:
Department of Economics, Pepperdine University, Malibu, CA, USA
HAROLD J. WALBERT*
Affiliation:
Department of Computational Social Science, George Mason University, Fairfax, VA, USA
R. AUGUST HARDY*
Affiliation:
Department of Economics, George Mason University, Fairfax, VA, USA
*
*Email: [email protected]
**Email: [email protected]
***Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper analyzes the determinants of network structure, as measured by hierarchy and monopolization, by examining various black market networks. We examine structures of networks on the Internet Dark Net (Virtual) and compare it to network structures of traditional black markets (Ground), using agent-based modeling. The purpose of modeling these two different types of illicit markets is to understand the network structure that emerges from the interactions of the agents in each environment. Traditional black markets are relatively hierarchical, with high degree and high betweenness. We compare the density and average length of the shortest path of the simulated Ground black market networks with our simulated Virtual network. We find that hierarchy and monopolization tendencies in networks are products of different transaction costs and information asymmetries. The Internet is an effective way to lower multiple aspects of network structure. We observe that the network structure surrounding the interactions in the Virtual black market is less hierarchical and slightly more monopolistic than the network structure of the Ground market.

Type
Research Article
Information
Journal of Institutional Economics , Volume 14 , Issue 5 , October 2018 , pp. 877 - 899
Copyright
Copyright © Millennium Economics Ltd 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Akerlof, G. and Yellen, J. (1994). Gang Behavior, Law Enforcement, and Community Values. In Aaron, H. J., Mann, T. E., and Taylor, T. (eds), Values and Public Policy. Washington, DC: Brookings Institution. Retrieved November 28, 2017 from https://www.brookings.edu/wp-content/uploads/2016/06/gang-behavior-law-enforcement-community-values-akerlof-yellen.pdf.Google Scholar
Allen, D. W (1999). Transaction Costs. In B. Bouckaert and G. de Geest (eds), Encyclopedia of Law & Economics. Retrieved November 28, 2017 from http://reference.findlaw.com/lawandeconomics/literature-reviews/0740-transaction-costs.html.Google Scholar
AlphaBay Market (2017). Listing Options. Retrieved March 6, 2017 from http://pwoah7foa6au2pul.onion/listing.php?id=180000.Google Scholar
Arquilla, J. and Ronfeldt, D. (2001). Networks and Netwars: The Future of Terror, Crime, and Militancy. Santa Monica, CA: RAND Corporation. Retrieved November 28. 2017 from www.rand.org/pubs/monograph_reports/MR1382.html.Google Scholar
Backhaus, J. (1979). Defending Organized Crime? A Note. Journal of Legal Studies, 8 (3), 623–31. Retrieved November 28, 2017 from www.jstor.org/stable/724172.Google Scholar
Bakken, S. A. (2015). Silk Road 2.0 – A Study of Cryptomarkets in a Deleuze-Guattarian Perspective. University of Oslo. Retrieved November 28, 2017 from https://www.duo.uio.no/handle/10852/44788.Google Scholar
Becker, G. S. (1968). Crime and Punishment: An Economic Approach. Journal of Political Economy, 76 (2), 169–217.Google Scholar
Branwen, G. (2015). Darknet Market Mortality Risks. Retrieved November 28, 2017 from www.gwern.net/Black-market%20survival.Google Scholar
Briere, M., Oosterlinck, K., and Szafarz, A.. (2013). Virtual Currency, Tangible Return: Portfolio Diversification with Bitcoins. Université Libre de Bruxelles, Working Papers, CEB: 13–031. Retrieved November 28, 2017 from http://search.proquest.com/docview/1438547719?accountid=14541.Google Scholar
Broekel, T., Balland, P., Burger, M., and van Oort, F. (2014). Modeling Knowledge Networks in Economic Geography: A Discussion of Four Methods. Annals of Regional Science, 53 (2), 423–52. Retrieved November 28, 2017 from https://doi.org.mutex.gmu.edu/10.1007/s00168-014-0616-2.Google Scholar
Buchanan, J. M. (1973). A Defense of Organized Crime? In Rottenberg, S. (ed.), Economics of Crime and Punishment. Washington, DC: American Enterprise Institute, pp. 119–32.Google Scholar
Buxton, J., and Bingham, T. (2015). The Rise and Challenge of Dark Net Drug Markets. Policy Brief, 7.Google Scholar
Christin, N. (2012). Traveling the Silk Road: A Measurement Analysis of a Large Anonymous Online Marketplace. Cornell University Library Working Paper, No. 12–018.Google Scholar
Chang, J.-J., Lu, H. C., and Chen, M. (2005). Organized Crime or Individual Crime? Endogenous Size of a Criminal Organization and the Optimal Law Enforcement. Economic Inquiry, 43 (3), 661–75.Google Scholar
Dana, L. P. (2001). Introduction: Networks, Internationalization & Policy. Small Business Economics, 16 (2), 57–62. Retrieved from www.jstor.org/stable/40229137.Google Scholar
Darknet Market (2017). In Wikipedia. Retrieved November 28, 2017 from https://en.wikipedia.org/w/index.php?title=Darknet_market&oldid=771022190.Google Scholar
DeepDotWeb: Surfacing the News from the Deep Web (2017). Retrieved from https://www.deepdotweb.com/ on January 26, 2017.Google Scholar
Deep Web: A Primer (n.d.). Retrieved November 28, 2017 from www.brightplanet.com/deep-web-university-2/deep-web-a-primer/.Google Scholar
Dick, A. R. (1995). When Does Organized Crime Pay? A Transaction Cost Analysis, International Review of Law and Economics, 5, 25–45.Google Scholar
Dingledine, R. and Murdoch, S. J. (2009). Performance Improvements on TOR, or Why Tor is Slow and What We're Going to Do about It. The Tor Project. Retrieved November 28, 2017 from https://svn.torproject.org/svn/projects/roadmaps/2009-03-11-performance.pdf.Google Scholar
Dolliver, D. S. and Kenney, J. L. (2016). Characteristics of Drug Vendors on the Tor Network: A Cryptomarket Comparison, Victims & Offenders, 11 (4), 600–20.Google Scholar
Downey, A. B. (2012). Think Java: How to Think Like a Computer Scientist. Eastleigh, Hampshire: Green Tea Press. Retrieved November 28, 2017 from www.greenteapress.com/thinkapjava/thinkapjava.pdf.Google Scholar
Eilstrup-Sangiovanni, M. and Jones, C. (2008). Assessing the Dangers of Illicit Networks: Why Al-Qaida May Be Less Threatening than Many Think. International Security, 33 (2), 7–44. Retrieved November 28, 2017 from www.jstor.org/stable/40207130.Google Scholar
Epstein, J. M. and Axtell, R. (1996). Growing Artificial Societies: Social Science from the Bottom Up. Washington, DC: Brookings Institution.Google Scholar
Everton, S. F. (2012). Disrupting Dark Networks. New York: Cambridge University Press.Google Scholar
Fiorentini, G. and Peltzman, S. (1995). Introduction, in Fiorentini, G. and Peltzman, S. (eds) The Economics of Organised Crime. Cambridge: Cambridge University Press and CEPR.Google Scholar
Gallup (2014). Investors Risk-Averse When it Comes to Retirement Savings, March 14. Retrieved November 28, 2017 from www.gallup.com/poll/168197/investors-risk-averse-comes-retirement-savings.aspx.Google Scholar
Gambetta, D. (1996). The Sicilian Mafia: The Business of Private Protection. Cambridge, MA: Harvard University Press.Google Scholar
Garoupa, N. (2000). The Economics of Organized Crime and Optimal Law Enforcement. Economic Inquiry, 38 (2): 278–88.Google Scholar
Gaup Moe, M. E. (2008). Quantification of Anonymity for Mobile Ad Hoc Networks. Electronic Notes in Theoretical Computer Science, pp. 1–12. Retrieved March 6, 2017 from www.elsevier.nl/locate/entcs.Google Scholar
Gordon, M., Forman, R. F., and Siatkowski, C.. (2006). Knowledge and Use of the internet as a Source of Controlled Substances. Journal of Substance Abuse Treatment, 30 (3), 271–4.Google Scholar
Griffiths, P., Lopez, D., Gallegos, R., Hughes, B., Noor, A., and Royuela, L. (2010). Khat Use and Monitoring Drug use in Europe: The Current Situation and Issues for the Future. Journal of Enthnopharmacology, 132 (2), 578–83.Google Scholar
Grinberg, R. (2011). Bitcoin: An Innovative Alternative Digital Currency. Hastings Science & Technology Law Journal, 4, 160–207.Google Scholar
Gunaratna, R. (2006). The Terror Market: Networks and Enforcement in the West. Harvard International Review, 27 (4), 66–9.Google Scholar
Hansa (2017a). Drugs. Retrieved March 6, 2017 from http://hansamkt2rr6nfg3.onion/listing/23500/.Google Scholar
Hansa (2017b). Knowledge Base and Support: Disputes. Retrieved March 6, 2017 from http://hansamkt2rr6nfg3.onion/support/9/.Google Scholar
Hardy, R. A. and Norgaard, J. R. (2015). Reputation in the Internet Black Market: An Empirical and Theoretical Analysis of the Dark Web. Journal of Institutional Economics, 12 (3), 1–25. DOI 10.1017/S1744137415000454.Google Scholar
Holderness, C. G. and Pontiff, J. (2012). Hierarchies and the Survival of POWs during WWII. Forthcoming in Management Science.Google Scholar
I am a Tor and Cybercrime researcher, AMA! (2015). Reddit.com. Retrieved November 28, 2017 from https://www.reddit.com/r/deepweb/comments/3mqkxz/i_am_a_tor_and_cybercrime_researcher_ama/.Google Scholar
Internet Freedom in a Surveillance Society (2015). Internet Freedom in a Surveillance Society. In Powers, S. M. and Jablonski, M. (eds), The Real Cyber War: The Political Economy of Internet Freedom. Chicago, IL: University of Illinois Press, pp. 180–202. Retrieved November 28, 2017 from www.jstor.org/stable/10.5406/j.ctt130jtjf.12.Google Scholar
Jankowski, M. S. (1991). Islands in the Street: Gangs and American Urban Society. Berkeley, CA: University of California Press.Google Scholar
Jennings, W. P. (1984). A note on the economics of organized crime. Eastern Economic Journal, 10 (3): 315–21.Google Scholar
Johnson, A., Syverson, P., Dingledine, R., and Mathewson, N. (2011). Trust-based Anonymous Communication: Adversary Models and Routing Algorithms, 1–12. Creative Commons Attribution 3.0, License. Retrieved November 28, 2017 from http://freehaven.net/~arma/anonymity-trust-ccs2011.pdf.Google Scholar
Jones, N. P. (2016). The State Reaction and Illicit-Network Resilience. In Jones, N. P. (ed.), Mexico's Illicit Drug Networks and the State Reaction Washington, DC: Georgetown University Press, pp. 19–46. Retrieved November 28, 2017 from www.jstor.org/stable/j.ctt1c2crb0.7.Google Scholar
Kruithof, K., Aldridge, J., Hétu, D. D., Sim, M., Dujso, E., and Hoorens, S. (2016). An Analysis of the Size, Scope, and the Role of the Netherlands. Internet-facilitated Drugs Trade. Retrieved March 9, 2017 from www.rand.org/pubs/research_reports/RR1607.html.Google Scholar
Lazear, E. and Rosen, S. (1981). Rank Order Tournaments as Optimum Labor Contracts. Journal of Political Economy, 89, 841–64.Google Scholar
Leeson, P. T. (2007). An-arrgh-chy: The Law and Economics of Pirate Organization. Journal of Political Economy, 115 (6): 1049–94.Google Scholar
Leeson, P. T. (2009). The Calculus of Piratical Consent: The Myth of the Myth of Social Contract. Public Choice, 139 (3–4): 443–59.Google Scholar
Leeson, P. T. (2010). Pirational Choice: The Economics of Infamous Pirate Practices. Journal of Economic Behavior & Organization, 76 (3): 497–510.Google Scholar
Leeson, P. T. and Rogers, D. (2012). Organizing Crime. Supreme Court Economic Review, 20 (1), 89–123.Google Scholar
Levitt, S. D. and Venkatesh, S. A. (2000). An Economic Analysis of a Drug-Selling Gang's Finances. Quarterly Journal of Economics, 115 (3), 755–89. Retrieved November 28, 2017 from www.jstor.org/stable/2586895.Google Scholar
Martin, J. (2014). Drugs on the Dark Net: How Cryptomarkets are Transforming the Global Trade in Illicit Drug. London: Palgrave Macmillan.Google Scholar
Mayntz, R. (2004). Organizational Forms of Terrorism: Hierarchy, Network, or a Type Sui Generis? (No. 04/4). MPIfG Discussion Paper.Google Scholar
McCoy, D., Bauer, K., Grunwald, D., Kohno, T., and Sicker, D. (2008). Shining Light in Dark Places: Understanding the Tor Network. In Borisov, N. and Goldberg, I. (eds), Privacy Enhancing Technologies (Vol. 5134). Berlin, Heidelberg: Springer, pp. 63–76. Retrieved November 28, 2017 from http://link.springer.com/10.1007/978-3-540-70630-4_5.Google Scholar
Norgaard, J. R., Walbert, H., and Hardy, R. A. (2017). Shadow Markets and Hierarchies, Appendix. Retrieved November 28, 2017 from https://drive.google.com/file/d/172YrbROG82Fff_sjnFK3OEk__Z4bTCQc/view.Google Scholar
Ogus, A. (2002). The Economic Basis of Legal Culture: Networks and Monopolization. Oxford Journal of Legal Studies, 22 (3), 419–34. Retrieved November 28, 2017 from www.jstor.org/stable/3600653.Google Scholar
Piano, E. E. (2017). Free Riders: The Economics and Organization of Outlaw Motorcycle Gangs. Public Choice. 170, 1–19.Google Scholar
Railsback, S. F. and Grimm, V. (2012). Agent-Based and Individual-Based Modeling: A Practical Introduction. Princeton, NJ: Princeton University Press.Google Scholar
Schelling, T. C. (1971). What Is the Business of Organized Crime? American Scholar, 40 (4), 643–52. Retrieved November 28, 2017 from www.jstor.org/stable/41209902.Google Scholar
Skaperdas, S. (2001). The Political Economy of Organized Crime: Providing Protection When the State Does Not. Economic Governance, 2 (3), 173–202.Google Scholar
Skarbek, D. (2010). Putting the “Con” into Constitutions: The Economics of Prison Gangs. Journal of Law, Economics, and Organization, 26 (2):183–211.Google Scholar
Skarbek, D. (2011). Governance and Prison Gangs. American Political Science Review, 105 (4), 702–16.Google Scholar
Skarbek, D. (2012). Prison Gangs, Norms, and Organizations. Journal of Economic Behavior & Organization, 82 (1): 96–109.Google Scholar
Spergel, I. (1995). The Youth Gang Problem: A Community Approach. New York: Oxford University Press.Google Scholar
Syverson, P. (2013). Practical Vulnerabilities of the Tor Anonymity Network. In Hsu, D. F. and Marinucci, D. (eds), Advances in Cyber Security: Technology, Operations, and Experiences. New York: Fordham University Press, pp. 60–73. Retrieved from November 28, 2017 www.jstor.org/stable/j.ctt13x07xx.7.Google Scholar
Tor Metrics (2015). About. Retrieved November 28, 2017 from https://metrics.torproject.org/about.html#client.Google Scholar
Tor Project (2015). Overview. Retrieved November 28, 2017 from https://www.torproject.org/about/overview.Google Scholar
Trautman, L. J. (2014). Virtual Currencies; Bitcoin & What Now after Liberty Reserve, Silk Road, and Mt. Gox? Richmond Journal of Law and Technology, 20 (4). Retrieved 28 November, 2017 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2393537.Google Scholar
Van Hout, M. C. and Bingham, T. (2014). Responsible Vendors, Intelligent Consumers: Silk Road, the Online Revolution in Drug Trading. International Journal of Drug Policy, 25 (2), 183–9. Retrieved November 28, 2017 from www.sciencedirect.com.mutex.gmu.edu/science/article/pii/S0955395913001722.Google Scholar
Varese, F. (2001). The Russian Mafia: Private Protection in a New Market Economy. Oxford: Oxford University Press.Google Scholar
Wall St. Market (2017). Featured Listings. Retrieved March 6, 2017 from http://wallstyizjhkrvmj.onion/index.Google Scholar