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Kidnap insurance and its impact on kidnapping outcomes

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  • Alexander Fink
  • Mark Pingle

Abstract

In the developing world, kidnapping is relatively common, and a market for kidnap insurance has arisen in response. We provide a model that allows us to analyze how kidnap insurance affects the interaction between the kidnapper and the victim’s family when both are self-interested and have complete knowledge. We find that a market for kidnap insurance can be supported because it benefits a risk-averse family, as long as the introduction of insurance does not increase the risk of kidnapping too much. Families should fully insure if purchasing insurance does not increase the probability of kidnapping, and partially insure otherwise. Kidnapping insurance allows families to redeem hostages from kidnappers with a greater willingness to kill, which may reduce the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Alexander Fink & Mark Pingle, 2014. "Kidnap insurance and its impact on kidnapping outcomes," Public Choice, Springer, vol. 160(3), pages 481-499, September.
    • Handle: RePEc:kap:pubcho:v:160:y:2014:i:3:p:481-499
    DOI: 10.1007/s11127-013-0108-4
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    Cited by:

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    2. Brandt, Patrick T. & George, Justin & Sandler, Todd, 2016. "Why concessions should not be made to terrorist kidnappers," European Journal of Political Economy, Elsevier, vol. 44(C), pages 41-52.
    3. Akintunde Thomas Bolanle & Adelana Joel Oluwasogo & Adeyemi Olabisi Omowumi, 2023. "The Prevalence Insecurity Issues in Ibarapa North Local Government, Oyo State, Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(8), pages 78-85, August.
    4. Wukki Kim & Justin George & Todd Sandler, 2021. "Introducing Transnational Terrorist Hostage Event (TTHE) Data Set, 1978 to 2018," Journal of Conflict Resolution, Peace Science Society (International), vol. 65(2-3), pages 619-641, February.
    5. Godwin Okafor & Obiajulu Ede, 2023. "Kidnapping rate and capital flight: Empirical evidence from developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2590-2606, July.
    6. Kim, Wukki & Sandler, Todd, 2021. "Duration and competing-risks determinants of terrorist hostage-taking incidents," European Journal of Political Economy, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Kidnapping; Insurance; Unintended consequences; Fatalities from kidnappings; G22; C72; K4;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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