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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 will affect 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 will reduce the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much.

Suggested Citation

  • Alexander Fink & Mark Pingle, 2012. "Kidnap Insurance and its Impact on Kidnapping Outcomes," ICER Working Papers 13-2012, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:13-2012
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    References listed on IDEAS

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    Cited by:

    1. 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.
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    More about this item

    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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