Asymmetric Information and Adverse Selection in Mauritian Slave Auctions

56 Pages Posted: 8 Dec 2008

See all articles by Georges Dionne

Georges Dionne

HEC Montreal - Department of Finance

Pascal St-Amour

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Swiss Finance Institute

Désiré Vencatachellum

African Development Bank

Date Written: October 1, 2008

Abstract

Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. Dynamic auction theory with private value highlights more aggressive bidding by uninformed bidders and higher prices when an informed participant is active. 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.

Keywords: Information Asymmetry, Adverse Selection, English Auction, Private Value, Slavery, Mauritius

JEL Classification: D82, N37

Suggested Citation

Dionne, Georges and St-Amour, Pascal and Vencatachellum, Désiré, Asymmetric Information and Adverse Selection in Mauritian Slave Auctions (October 1, 2008). Swiss Finance Institute Research Paper No. 08-40. Available at SSRN: https://ssrn.com/abstract=1311324 or http://dx.doi.org/10.2139/ssrn.1311324

Georges Dionne

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Pascal St-Amour (Contact Author)

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Désiré Vencatachellum

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

HOME PAGE: http://www.afdb.org

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