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Kidnap Insurance and its Impact on Kidnapping Outcomes

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Author Info

  • Mark Pingle

    ()
    (Department of Economics, University of Nevada, Reno)

  • Alexander Fink

    ()
    (Institut für Wirtschaftspolitik; University of Leipzig)

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 who are more willing to kill, which reduces the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much.

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File URL: http://www.coba.unr.edu/econ/wp/papers/UNRECONWP13001.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number 13-001.

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Length: 28 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:unr:wpaper:13-001

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Keywords: Kidnap;

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References

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  1. Bertrand Crettez & Régis Deloche, 2009. "A cliometric analysis of the Aldo Moro kidnapping and assassination," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 3(2), pages 123-139, June.
  2. M. Vannini & B. McCannon & C. Detotto, 2012. "Understanding Ransom Kidnapping and Its Duration," Working Paper CRENoS 201219, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  3. Lapan, Harvey E & Sandler, Todd, 1988. "To Bargain or Not to Bargain: That Is the Question," American Economic Review, American Economic Association, vol. 78(2), pages 16-21, May.
  4. Catherine Rodriguez & Edgar Villa, 2012. "Kidnap risks and migration: evidence from Colombia," Journal of Population Economics, Springer, vol. 25(3), pages 1139-1164, July.
  5. Atkinson, Scott E & Sandler, Todd & Tschirhart, John, 1987. "Terrorism in a Bargaining Framework," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 1-21, April.
  6. Rony Pshisva & Gustavo A. Suarez, 2006. "'Captive markets': the impact of kidnappings on corporate investment in Colombia," Finance and Economics Discussion Series 2006-18, Board of Governors of the Federal Reserve System (U.S.).
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Blog mentions

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  1. Is kidnap insurance a good thing?
    by Economic Logician in Economic Logic on 2013-04-04 14:34:00

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