Interdependent Security: The Case of Identical Agents
Do 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.
|Date of creation:||Apr 2002|
|Publication status:||published as Kunreuther, Howard and Geoffrey Heal. "Interdependent Security: the case of identical agents." Journal of Risk and Uncertainty 2003.|
|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
References listed on IDEAS
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.:
- Philipson, Tomas, 2000.
"Economic epidemiology and infectious diseases,"
Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 33, pages 1761-1799
- 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.
- Ian Ayres & Steven D. Levitt, 1998. "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 43-77.
- 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.