Limited Commitment and Moral Hazard in Late Classical Athenian Maritime Loans

Posted: 20 Mar 2011

See all articles by Matthias Kehrig

Matthias Kehrig

Duke University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: April 14, 2008

Abstract

Maritime loans in late classical and early Hellenistic Athens stand out by their high annualised interest rate usually ranging between 60 and 100%. Evaluating the information about loan contracts given in legal speeches delivered in Athenian courts during the 4th century BC, I claim that this high interest rate reflects informational problems. In particular, I argue that a combination of only partially enforceable contracts, lack of lenders’ ability to monitor borrowers and a special Athenian law freeing the borrower from repayment in case of shipwreck or piracy gave rise to a serious moral hazard problem. A simple game theoretic model that incorporates this problem is formulated and found to be able to explain the data at reasonable parameter calibrations.

JEL Classification: E32

Suggested Citation

Kehrig, Matthias, Limited Commitment and Moral Hazard in Late Classical Athenian Maritime Loans (April 14, 2008). Available at SSRN: https://ssrn.com/abstract=1787769

Matthias Kehrig (Contact Author)

Duke University ( email )

237 Social Sciences
Box 90097
Durham, NC 27708-0097
United States

HOME PAGE: http://sites.google.com/site/matthiaskehrig/research

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
482
PlumX Metrics