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Terrorists’ Equilibrium Choices When No Attack Method is Riskless

  • Peter Phillips

    ()

This paper builds on Phillips (Defence and Peace Economics, 16(6), 403–414, 2009 ) and enhances the NM expected utility analysis of terroristic behaviour by drawing on the fact that expected utility maximising behaviour in a setting where a terroristic group makes optimal decisions from a choice set containing combinations of attack methods can be analysed in terms of two moments (mean and variance) of the random payoffs associated with each attack method combination. This paper presents an equilibrium relationship between the expected payoffs of attack method combinations and the risk associated with those payoffs. This is an equilibrium model of choice under uncertainty when the behaviour of interest is the selection by a terroristic group of an optimal decision from a choice set containing attack method combinations. Copyright International Atlantic Economic Society 2011

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File URL: http://hdl.handle.net/10.1007/s11293-010-9253-z
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Article provided by Springer & International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 39 (2011)
Issue (Month): 2 (June)
Pages: 129-141

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Handle: RePEc:kap:atlecj:v:39:y:2011:i:2:p:129-141
DOI: 10.1007/s11293-010-9253-z
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  1. Bruno S. Frey & Simon Luechinger, . "How to Fight Terrorism: Alternatives to Deterrence," IEW - Working Papers 137, Institute for Empirical Research in Economics - University of Zurich.
  2. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  3. Peter Phillips, 2009. "Applying Modern Portfolio Theory To The Analysis Of Terrorism. Computing The Set Of Attack Method Combinations From Which The Rational Terrorist Group Will Choose In Order To Maximise Injuries And Fat," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(3), pages 193-213.
  4. Joao Ricardo Faria & Daniel Arce, 2005. "Terror Support And Recruitment," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(4), pages 263-273.
  5. James Tobin, 1969. "Comment on Borch and Feldstein," Review of Economic Studies, Oxford University Press, vol. 36(1), pages 13-14.
  6. M. S. Feldstein, 1969. "Mean-Variance Analysis in the Theory of Liquidity Preference and Portfolio Selection," Review of Economic Studies, Oxford University Press, vol. 36(1), pages 5-12.
  7. Paul A. Samuelson, 1970. "The Fundamental Approximation Theorem of Portfolio Analysis in terms of Means, Variances and Higher Moments," Review of Economic Studies, Oxford University Press, vol. 37(4), pages 537-542.
  8. Landes, William M, 1978. "An Economic Study of U.S. Aircraft Hijacking, 1961-1976," Journal of Law and Economics, University of Chicago Press, vol. 21(1), pages 1-31, April.
  9. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-55, July.
  10. K. Borch, 1969. "A Note on Uncertainty and Indifference Curves," Review of Economic Studies, Oxford University Press, vol. 36(1), pages 1-4.
  11. Lintner, John, 1971. "The Effect of Short Selling and Margin Requirements in Perfect Capital Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 6(05), pages 1173-1195, December.
  12. Levy, H & Markowtiz, H M, 1979. "Approximating Expected Utility by a Function of Mean and Variance," American Economic Review, American Economic Association, vol. 69(3), pages 308-17, June.
  13. Peter Phillips, 2005. "The 'Price' Of Terrorism," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(6), pages 403-414.
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