After my post about the Value of Statistical Life, and the great feedback I got, I might continue with that topic. I recently read Anja Shortland’s book “Kidnap”. It’s a fantastic analysis of the micro economic intricacies of trading with human lives. Here are some aspects of the trade:
1. Unclear Demand Price: Value of the Good (Person) being traded must be determined. It is unclear what the demand for this particular person is. Who is willing to pay how much? Shortland points out that it is always good to counter an offer of 1 million dollars by the kidnappers with an offer of 5 000 dollars by the buyers.
2. Unclear Supply Costs: Not only the demand side is unclear, also the supply side is undefined. What are the costs of factors of production for a kidnapping group. This is important to know in order to negotiate a price that is slightly higher than their cost of producing a kidnapping. They won’t sell their goods (hostages) unless they make profit. So here it is important to know who is kidnapping, where and how. These factors inform how much they spent and thus how much they need to be compensated for.
2. Unclear time frame of trading: Kidnapping is a trade with perishable goods (humans don’t live for ever and change). In addition to that both parties are interested in ending the kidnap sooner rather than later because prolonging a kidnapping is costly. The supplier has to hide, and feed his hostage and his crew, while ensuring security. The demand side might be concerned with physical and mental harm to the hostage as well as possible opportunity cost of time lost in the kidnap. So the price will also be determined by who has the higher cost of prolonging the bargaining, the kidnapper or the retrievers?
3. Unclear Type of Bargaining: In economics there are many types of auctions. But this is no usual Dutch auction, or Sealed Bid auction; Kidnap for ransom negotiation has no rules. Many defining features of an auction are unclear: Who makes the first offer? How many offers will there be? Are offers presented consecutively or does one wait and take turns (sometimes it is a strategy to wait for 4 consecutive offers from the kidnappers before any counteroffer is being made). This leaves both demand and supply in an awkward position.
4. No Trust: As with so many criminal transactions, there is no law-enforcement to ensure that money and human have been traded as agreed upon. Kidnapers, after getting their money, could just keep the hostage and ask for a second ransom payment. Shortland argues that this is rarely the case because at this point the further costs of kidnapping might outweigh the expected return of a second payment.
All in all, this is an exciting field of study and I am incredibly grateful for Anja Shortland book, summarizing the economics of kidnapping. If you think this is interesting, I can write some more blog posts on how she resolves some of these issues. Her main takeaway is: Let professional kidnapping negotiators guide you, because they have a better idea of the costs, the time frame, the bargaining and enforcement of kidnapping for ransom.
Comments