This paper provides evidence on the costs imposed by crime and violence in five Latin American countries: Chile, Costa Rica, Honduras, Paraguay and Uruguay. Crime and violence stand out as one of the major social challenges to be dealt with in Latin America. However, the incidence of crime (and thus its social and economic impact) varies among countries. Based on a common theoretical framework across all five countries, we use a costsaccounting methodology and find that the cost of criminality varies from a striking 10.5 % of GDP in Honduras to a moderate 2.5 % in Costa Rica. Also, by quantifying the different components of the cost equation separately, we provide insight on which felonies are more costly and which agents are burdened most heavily by these costs.
A buyer and a seller bargain over the price of an object. The buyer's value is common knowledge and the seller has private information about his production cost. In the beginning of the game, each player proposes a price and becomes committed to it with small probability. We characterize the set of equilibria. We show that equilibria with inefficient delays exist if and only if the difference in cost between some pair of adjacent types is large enough and the probability of low-cost type seller is sufficiently high. When there are multiple equilibria, the buyer prefers the least efficient equilibrium and all types of the seller prefer the most efficient equilibrium. In an extension where the seller can decide whether to adopt a cost-saving technology before bargaining, we pin down the equilibrium adoption rate and provide conditions under which bargaining inefficiencies arise in all equilibria.
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