Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Transaction Costs
Duke University - Department of Economics
Eric J. Chaney
Harvard University - Department of Economics
affiliation not provided to SSRN
December 22, 2011
Economic Research Initiatives at Duke (ERID) Working Paper No. 115
This paper uses ransom prices and time to ransom for over 10,000 captives rescued from two Barbary strongholds to investigate the empirical relevance of dynamic bargaining models with one-sided asymmetric information in ransoming settings. We observe both multiple negotiations that were ex ante similar from the uninformed party’s (seller’s) point of view, and information that only the buyer knew. Through reduced form analysis, we test some common qualitative predictions of dynamic bargaining models. We also structurally estimate the model in Cramton (1991), to compare negotiations in different Barbary strongholds. Our estimates suggest that the historical bargaining institutions were remarkably efficient, despite the presence of substantial asymmetric information.
Number of Pages in PDF File: 48Accepted Paper Series
Date posted: November 4, 2011 ; Last revised: January 7, 2012
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