Nature plays with dice - terrorists do not: Allocating resources to counter strategic versus probabilistic risks
Probabilistic uncertainty is caused by "chance", whereas strategic uncertainty is caused by an adverse interested party. Using linear impact functions, the problems of allocating a limited resource to defend sites that face either probabilistic risk or strategic risk are formulated as optimization problems that are solved explicitly. The resulting optimal policies differ - under probabilistic risk, the optimal policy is to focus the investment of resources on priority sites where they yield the highest impact, while under strategic risk, the best policy is to spread the resources so as to decrease the potential damage level of the most vulnerable site(s). Neither solution coincides with the commonly practiced proportionality allocation scheme.
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References listed on IDEAS
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- Coughlin, Peter J, 1992. "Pure Strategy Equilibria in a Class of Systems Defense Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 20(3), pages 195-210.
- Martin J. Osborne & Ariel Rubinstein, 1994.
"A Course in Game Theory,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262650401, December.
- Kaplan, Edward H. & Pollack, Harold, 1998. "Allocating HIV Prevention Resources," Socio-Economic Planning Sciences, Elsevier, vol. 32(4), pages 257-263, December.
- Martin Shubik & Robert J. Weber, 1978. "Competitive Valuation of Cooperative Games," Cowles Foundation Discussion Papers 482, Cowles Foundation for Research in Economics, Yale University.
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