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Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Transaction Costs

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  • Attila Ambrus
  • Eric Chaney
  • Igor Salitskiy

Abstract

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.

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  • Attila Ambrus & Eric Chaney & Igor Salitskiy, 2011. "Pirates of the Mediterranean: An Empirical Investigation of Bargaining with Transaction Costs," Working Papers 11-24, Duke University, Department of Economics.
    • Handle: RePEc:duk:dukeec:11-24
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    Cited by:

    1. Tim Besley & Thiemo Fetzer & Hannes Mueller, 2012. "One Kind of Lawlessness: Estimating the Welfare Cost of Somali Piracy," UFAE and IAE Working Papers 898.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Bradley J Larsen, 2021. "The Efficiency of Real-World Bargaining: Evidence from Wholesale Used-Auto Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 851-882.
    3. Timothy Besley & Thiemo Fetzer & Hannes Mueller, 2015. "The Welfare Cost Of Lawlessness: Evidence From Somali Piracy," Journal of the European Economic Association, European Economic Association, vol. 13(2), pages 203-239, April.

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