Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Asymmetric Information

56 Pages Posted: 4 Nov 2011 Last revised: 19 Nov 2014

Attila Ambrus

Duke University - Department of Economics

Eric J. Chaney

Harvard University - Department of Economics

Igor Salitskiy

Vienna University of Economics and Business

Date Written: November 6, 2014

Abstract

We investigate the effect of delay on prices in bargaining situations using a data set containing thousands of captives ransomed from Barbary pirates between 1575 and 1692. Plausibly exogenous variation in the delay in ransoming provides evidence that negotiating delays decreased the size of ransom payments, and that most of the effect stems from the signaling value of strategic delay, in accordance with theoretical predictions. We also structurally estimate a version of the screening type bargaining model, adjusted to our context, and find that the model fits both the observed prices and acceptance probabilities well.

Suggested Citation

Ambrus, Attila and Chaney, Eric J. and Salitskiy, Igor, Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Asymmetric Information (November 6, 2014). Economic Research Initiatives at Duke (ERID) Working Paper No. 115. Available at SSRN: https://ssrn.com/abstract=1954149

Attila Ambrus (Contact Author)

Duke University - Department of Economics ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Eric J. Chaney

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Igor Salitskiy

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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