Interdependent Security: The Case of Identical Agents
AbstractDo firms have adequate incentives to invest in anti-terrorism mechanisms? This paper develops a framework for addressing this issue when the security choices by one agent affect the risks faced by others. We utilize the airline security problem to illustrate how the incentive by one airline to invest in baggage checking is affected by the decisions made by others. Specifically if an airline believes that others will not invest in security systems it has much less economic incentive to do so on its own. Private sector mechanisms such as insurance and liability will not necessarily lead to an efficient outcome. To induce adoption of security measures one must turn to regulation, taxation or institutional coordinating mechanisms such as industry associations. We compare the airline security example with problems having a similar structure (i.e., computer security and fire protection) as well as those with different structures (i.e., theft protection and vaccinations). The paper concludes with suggestions for future research.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8871.
Date of creation: Apr 2002
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ian Ayres & Steven D. Levitt, 1998.
"Measuring Positive Externalities From Unobservable Victim Precaution: An Empirical Analysis Of Lojack,"
The Quarterly Journal of Economics,
MIT Press, vol. 113(1), pages 43-77, February.
- Ian Ayres & Steven D. Levitt, 1997. "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack," NBER Working Papers 5928, National Bureau of Economic Research, Inc.
- Tomas Philipson, 1999.
"Economic Epidemiology and Infectious Diseases,"
NBER Working Papers
7037, National Bureau of Economic Research, Inc.
- Hershey, John C. & Asch, David A. & Thumasathit, Thi & Meszaros, Jacqueline & Waters, Victor V., 1994. "The Roles of Altruism, Free Riding, and Bandwagoning in Vaccination Decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 59(2), pages 177-187, August.
- Annette Hofmann, 2007. "Internalizing externalities of loss prevention through insurance monopoly: an analysis of interdependent risks," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 32(1), pages 91-111, June.
- Cletus C. Coughlin & Jeffrey P. Cohen & Sarosh R. Khan, 2002.
"Aviation security and terrorism: a review of the economic issues,"
Federal Reserve Bank of St. Louis, issue Sep, pages 9-24.
- Cletus C. Coughlin & Jeffrey P. Cohen & Sarosh R. Khan, 2002. "Aviation security and terrorism: a review of the economic issues," Working Papers 2002-009, Federal Reserve Bank of St. Louis.
- Jeffrey R. Brown & Randall S. Kroszner & Brian H. Jenn, 2002.
"Federal Terrorism Risk Insurance,"
NBER Working Papers
9271, National Bureau of Economic Research, Inc.
- Geoffrey Heal & Howard Kunreuther, 2003. "You Only Die Once: Managing Discrete Interdependent Risks," NBER Working Papers 9885, National Bureau of Economic Research, Inc.
- Howard Kunreuther, 2001. "Risk Analysis and Risk Management in an Uncertain World," Center for Financial Institutions Working Papers 02-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Jain, Sanjay & Mukand, Sharun W., 2004. "The economics of high-visibility terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 479-494, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.