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Posts Tagged ‘pirates’

Pirate Economics, Somali Edition

An Economist article looks at a new study by the International Criminal Police Organization, United Nations Office on Drugs and Crime and World Bank on the economics of Somali piracy, including pirate earnings:

The authors interviewed current and former pirates, their financial backers, government officials, middlemen and others. They estimate that between $339m and $413m was paid in ransoms off the Somali coast between 2005 and 2012. The average haul was $2.7m. Ordinary pirates usually get $30,000-75,000 each, with a bonus of up to $10,000 for the first man to board a ship and for those bringing their own weapon or ladder.

The article also explores the financing and profit of pirate expeditions, and how ransom money trickles down:


The Economics of a Ransom

In The Atlantic, Megan McArdle traces the economics of ransom negotiation:

Economists would describe hostage negotiation as a bilateral monopoly price negotiation that is structurally just a special case of chicken. That is, unlike a barrel of oil or a freight car full of soybeans which can trade on an extremely liquid market with innumerable buyers and sellers, a hostage has exactly one seller (the kidnappers) and exactly one buyer (the employer and/or family of the hostage). When there is only one buyer, the opportunity cost for ransoming the hostage is zero.