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Asymmetric Information and Adverse Selection in Mauritian Slave Auctions

Author

Listed:
  • Georges Dionne
  • Pascal St-Amour
  • Désiré Vencatachellum

Abstract

Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. The theory of dynamic auctions with private and common values suggests that when an informed participant is known to be active, uninformed bidders will be more aggressive and the selling price will be higher. We conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave, indicative of information asymmetry. We then test for adverse selection using sale motivation. Our results indicate large discounts on voluntary as compared to involuntary sales. Consistent with adverse selection, the market anticipated that predominantly low-productivity slaves would be brought to the market in voluntary sales. Copyright 2009, Wiley-Blackwell.

Suggested Citation

  • Georges Dionne & Pascal St-Amour & Désiré Vencatachellum, 2009. "Asymmetric Information and Adverse Selection in Mauritian Slave Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(4), pages 1269-1295.
    • Handle: RePEc:oup:restud:v:76:y:2009:i:4:p:1269-1295
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00561.x
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    Cited by:

    1. Georges Dionne & Mélissa La Haye & Anne-Sophie Bergerès, 2015. "Does asymmetric information affect the premium in mergers and acquisitions?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 819-852, August.
    2. Février, Philippe & Linnemer, Laurent & Visser, Michael, 2012. "Testing for asymmetric information in the viager market," Journal of Public Economics, Elsevier, vol. 96(1), pages 104-123.
    3. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    4. Georges Dionne & Casey G. Rothschild, 2011. "Risk Classification in Insurance Contracting," Cahiers de recherche 1137, CIRPEE.
    5. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
    6. Dionne, Georges & Fombaron, Nathalie & Doherty, Neil, 2012. "Adverse selection in insurance contracting," Working Papers 12-8, HEC Montreal, Canada Research Chair in Risk Management.
    7. Alois Geyer & Daniela Kremslehner & Alexander Muermann, 2020. "Asymmetric Information in Automobile Insurance: Evidence From Driving Behavior," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 969-995, December.
    8. Ciprian MatiÅŸ & Eugenia MatiÅŸ, 2013. "Asymmetric Information In Insurance Field: Some General Considerations," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 1-17.
    9. Jedidi, Helmi & Dionne, Georges, 2019. "Nonparametric testing for information asymmetry in the mortgage servicing market," Working Papers 19-1, HEC Montreal, Canada Research Chair in Risk Management, revised 28 Oct 2019.
    10. Yamamoto, Shinichi & 山本, 信一 & Yoneyama, Takau & 米山, 高生 & Kwon, W. Jean, 2012. "An Experimental Study On Adverse Selection And Moral Hazard," Hitotsubashi Journal of commerce and management, Hitotsubashi University, vol. 46(1), pages 51-64, October.
    11. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
    12. Xiaoqi Zhang & Yi Chen & Yi Yao, 2021. "Dynamic information asymmetry in micro health insurance: implications for sustainability," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 468-507, July.
    13. David Rowell & Son Nghiem & Luke B Connelly, 2017. "Two Tests for Ex Ante Moral Hazard in a Market for Automobile Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(4), pages 1103-1126, December.
    14. Pierre Picard & Kili Wang, 2015. "INSURANCE FRAUD THROUGH COLLUSION BETWEEN POLICYHOLDERS AND CAR DEALERS: THEORY AND EMPIRICAL EVIDENCE Pierre PICARD," Working Papers hal-01140590, HAL.
    15. Carole Botton & Julien Fouquau, 2014. "L'Expertise De L'Evaluation : Une Construction Sociale," Post-Print hal-01899544, HAL.
    16. Carole Botton & Julien Fouquau, 2012. "Adjugé, Vendu...Assuré," Post-Print hal-00937902, HAL.
    17. Koptyug, Nikita, 2016. "Asymmetric Information in Auctions: Are Resellers Better Appraisers?," Working Paper Series 1110, Research Institute of Industrial Economics.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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