To illustrate an old point - that it's hard to distinguish between extortion and trade negotiations - here's a schematic diagram of extortion, alternating actions by player B (blackmailer/extorter//blue) and V (victim//violet):

The extorter can let the default Def happen, or can instead do a threat, ending up in point T. Then the victim can resist (Res) or surrender (Sur). If the victim resists, the extorter has the option of carrying out their threat (C) or not doing so (¬C).

You need a few conditions to make this into a extortion situation:

1. Sur has to be the best outcome for B (or else the extortion has no point).
2. To make sure that T is a true threat, Sur has to be worse than Def for V, and C has to be worse that ¬C and Def for B.
3. And to make this into extortion, C has to be worse than Def for V.

A mere threat doesn't make this into extortion. Indeed, trade negotiations are a series of repeated threats from both sides, making offers with the implicit threat that they will walk away from the deal entirely if that offer is not accepted.

But if C is worse that Def for V, then this seems a true extortion: V will end up worse if they resist a extorter who carries out their threats, and they would have much preferred that the extorter not be able to make credible threats in the first place. And the only reason the extorter made the threats, was to force the victim to surrender.

Fairness and equity

Note that this is not about fairness or niceness. It's perfectly possible to extort someone into giving you fair treatment (depending on how you see the default point, many of the boycotts during the civil right movement would count as extortion).

The all important default

This model seems clear; so why is it so hard to identify extortion in real life? One key issue is disagreement over the default point. Consider the following situations:

• During the Cuban missile crisis, it was clear to the Americans that the default was no nuclear missiles in Cuba, and the soviets were recklessly violating this default. To the USSR, the default was obviously that countries could station nuclear missiles on their allies' territories (like the Americans were doing in Turkey). Then, once the blockade was in place and the soviet ships were on their way, the default seems to be nuclear war (meaning that practically nothing could count as extortion in this situation).
• Take a management-union dispute, where management wants to cut pay. The unions can argue that this violates long-standing company policy of decent pay. Management can retort that the default is actually to be a profitable company, and that their industry is currently in decline, so declining pay should be the default. After a bit of negotiating, the two seem to reach the framework of a decent understanding - is this now the default for further negotiations?
• "You must give me something to satisfy my population!" "Now, I'm fine with this, but when our army arrives, I'm not sure I can control them." "Well, I'll try and talk to my president, but he's crazy! Throw me some sort of bone here, will you?" All these types of arguments are an attempt to shift the default in their favour. Sure, the negotiator isn't threatening you, they just needs your help to contain the default behaviour of their people/army/president.
• Two people are negotiating to trade water and food. If no trade is reached, they will both die. Can "both dying" be considered a reasonable default? Or is "both trade at least enough to ensure mutual survival" a default, seeing as "both dying" is not an outcome either would ever want? Can a situation that will never realistically happen be considered a default?
• Take the purest example of blackmail (extortion via information): a photographer snaps shots of an adulterous couple, and sells the photos back to them for much money. Blackmail! But what if they just happened to be in a shot that the photographer was taking of other people? Then the photographer is suppressing the photos to help the couple, and charging a reasonable fee for that (what if the fee is unreasonable? does it make a difference?). But what if the photographer deliberately hangs around areas where trysts often happen, to get some extra cash? Or what if they don't do that deliberately, but photographers who don't hang around these areas can't turn a profit and change jobs, so that only these ones are left?

These examples should be sufficient to illustrate the degree of the problem, and also show how defaults are often forged by implicit and explicit norms, so extortions are clearest cut when they also include norm violation, trust violation, or other dubious elements. behaviours. In a sense, picking the default is the important thing; picking exactly the right default is less important, since once the default is known, people can adjust their expectations and behaviour in consequence.