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Prospect Theory and Terrorist Choice

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  • Peter J. Phillips
  • Gabriela Pohl

Abstract

We study terrorist choice from the perspective of economics and psychology. Using RAND-MIPT data about the injuries and fatalities inflicted by different terrorist attack methods, we compute sets of preference orderings over the attack methods using prospect theory. This incorporates reference point dependence, risk seeking in the domain of losses, risk aversion in the domain of gains, non-linear preferences and loss aversion into an analysis of terrorist behaviour. We pay particular attention to the importance of a reference point in the context of ‘copycat’ acts of violence and the influence of loss aversion on the choice of attack method. Our results provide an indication of the types of attack methods that would be chosen by a terrorist whose decision-making process is described by prospect theory and who might, for example, seek to emulate or surpass the actions of a predecessor.

Suggested Citation

  • Peter J. Phillips & Gabriela Pohl, 2014. "Prospect Theory and Terrorist Choice," Journal of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 139-160, May.
    • Handle: RePEc:taf:recsxx:v:17:y:2014:i:1:p:139-160
    DOI: 10.1016/S1514-0326(14)60006-4
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    Cited by:

    1. Koivisto, Raija & Kulmala, Ilpo & Gotcheva, Nadezhda, 2016. "Weak signals and damage scenarios — Systematics to identify weak signals and their sources related to mass transport attacks," Technological Forecasting and Social Change, Elsevier, vol. 104(C), pages 180-190.
    2. Jean-Paul Azam & Mario Ferrero, 2019. "Jihad Against Palestinians? The Herostratos Syndrome and the Paradox of Targeting European Jews," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(6), pages 687-705, September.
    3. Cind Du Bois, 2017. "A prospect theory perspective on terrorism," International Journal of Business and Social Research, LAR Center Press, vol. 7(5), pages 1-8, May.
    4. Price Gregory N. & Elu Juliet U., 2017. "Climate Change and Cross-State Islamist Terrorism in Nigeria," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 23(3), pages 1-13, August.
    5. Phillips Peter J. & Pohl Gabriela, 2018. "The Deferral of Attacks: SP/A Theory as a Model of Terrorist Choice when Losses Are Inevitable," Open Economics, De Gruyter, vol. 1(1), pages 71-85, February.
    6. Peter J. Phillips & Gabriela Pohl, 2021. "Crowd counting: a behavioural economics perspective," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(6), pages 2253-2270, December.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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