Terrorism: Theory and applications
In: Handbook of Defense Economics
This chapter reviews game-theoretic and choice-theoretic depictions of terrorist behavior. A simple game-theoretic framework is presented to ascertain under what circumstances a government would want to precommit itself to a no-negotiation strategy. In another game model, we analyze whether two governments (nations) that are targeted by the same terrorist group would overdeter or underdeter terrorist attacks. Moreover, we demonstrate that piecemeal policy, which allows the governments to share intelligence but not deterrence decisions, can be worse than no coordination. Choice-theoretic models identify substitution and complementarity possibilities among diverse modes of terrorist attacks as terrorists respond optimally to government actions. A host of time-series techniques are used to study the effectiveness of alternative antiterrorism policies. Vector-autoregression intervention procedures are particularly suited. Time-series analyses are also used to identify cycles, trends, and irregular components for forecasting purposes.
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