On smart sanctions

- Constructs a game theoretic model of an oligarchic economy.
- Studies the relationship between corruption and autocracy in these economies.
- Studies smart international sanctions.
- The effectiveness of sanctions crucially depends on elasticity of substitutions.
- Compares the effectiveness of smart vs. dumb sanctions.

We construct a game theoretic model of an oligarchic economy that potentially could be targeted by smart international sanctions. Oligarchs in this economy provide support for their leader, a strong man and potentially an autocrat, in return for favors that results in having income higher than the average income in the country. We derive the conditions under which smart sanctions lead to compliance by the target country. Moreover, we draw some comparison between the effectiveness of smart and dumb sanctions for these economies.