Rationality of the Terrorist Group and Government’s Policy: A Game Theoretic Approach

The two ideas of the rationality of terrorist organisations and the costly leader game are used in this paper to construct a game theoretic model. It is an addition to the literature on terrorism and leader-follower games, in which the government and a terrorist organisation are the two players. Terrorist group can be rational or irrational. In case it is rational, it does the cost-benefit analysis and is open to negotiation. Only in this case, the government chooses to not spend on counter-terrorist measures. The irrational group has lexicographic preferences, which means that it prefers a successful attack to attract attention and recruits at the beginning or finish of its operation. Consequently, it is assumed that the irrational group will always attack. the irrational terrorist organisation has the option of either choosing not to mimic the rational group or choosing to do so at a psychological cost. Although the irrational group dislikes imitation. It seeks to duplicate the rational group so that the government withdraws and cuts back on spending on counter-terrorism. A costly leader model is set up in the paper, where the government can incur a cost to gather information about the type of terrorist group. In this framework, the paper provides policy prescriptions concerning counter-terrorist measures that the government should take in case the type of terrorist group being rational or irrational is unknown and it highlights the importance of intelligence.