Even where all agents are risk-neutral, merchants can insure themselves against piracy. Such self-insurance is surprisingly invulnerable to moral hazard. Further, there exist a patrolling intensity and/or penalties for captured pirates which, along with mercantile self-insurance, could eliminate piracy.
Piracy, Violent crime, Economies of scale, Penalties, Moral hazard, Selfinsurance
GUHA, Brishti and GUHA, Ashok S..
Pirates and Traders: Some Economics of Pirate-Infested Seas. (2011). Economics Letters. 111, (2), 147-150. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1334
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