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Kidnap Insurance and its Impact on Kidnapping Outcomes

Author

Listed:
  • 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.

Suggested Citation

  • Mark Pingle & Alexander Fink, 2013. "Kidnap Insurance and its Impact on Kidnapping Outcomes," Working Papers 13-001, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
  • Handle: RePEc:unr:wpaper:13-001
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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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    References listed on IDEAS

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    1. 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.
    2. Catherine Rodriguez & Edgar Villa, 2012. "Kidnap risks and migration: evidence from Colombia," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 1139-1164, July.
    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. 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.).
    5. Vannini Marco & Claudio Detotto & Bryan Mccannon, 2015. "« Ransom Kidnapping »," Post-Print hal-01289362, HAL.
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    7. 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.
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    9. Leeson, Peter T. & Nowrasteh, Alex, 2011. "Was privateering plunder efficient?," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 303-317, August.
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    11. Charlinda Santifort & Todd Sandler, 2013. "Terrorist success in hostage-taking missions: 1978–2010," Public Choice, Springer, vol. 156(1), pages 125-137, July.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Is kidnap insurance a good thing?
      by Economic Logician in Economic Logic on 2013-04-04 19:34:00

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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.

    More about this item

    Keywords

    Kidnap;

    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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