Asymmetric information and adverse selection in Mauritian slave auctions

Georges Dionne (), Pascal St-Amour () and Désiré Vencatachellum
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Pascal St-Amour: HEC Montreal, Department of Applied Economic
Désiré Vencatachellum: African Development Bank

No 06-2, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. Dynamic auction theory with private value highlights more aggressive bidding by uninformed bidders and higher prices when an informed participant is active. We conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave, indicative of information asymmetry. We then test for adverse selection using sale motivation. Our results indicate large discounts on voluntary as compared to involuntary sales. Consistent with adverse selection, the market anticipated that predominantly low-productivity slaves would be brought to the market in voluntary sales.

Keywords: Information asymmetry; adverse selection; English auction; private value; slavery; Mauritius (search for similar items in EconPapers)
JEL-codes: D82 N37 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2008-10-13
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Related works:
Journal Article: Asymmetric Information and Adverse Selection in Mauritian Slave Auctions (2009)
Working Paper: Asymmetric Information and Adverse Selection in Mauritian Slave Auctions (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2006_002

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