Citation

Bandyopadhyay S, Sandler TODD. Economica 2009; 78(311): 546-564.

Copyright

(Copyright © 2009, The London School of Economics and Political Science, Publisher John Wiley and Sons)

DOI

10.1111/j.1468-0335.2009.00823.x

PMID

unavailable

Abstract

A two-stage game depiction of counterterrorism is presented, emphasizing the interaction between preemptive and defensive measures taken by two commonly targeted countries. The preemptor is apt to be the high-cost defender with the greater foreign interests. A prime-target country may also assume the preemptor role. The analysis identifies key factors—cost comparisons, foreign interests, targeting risks and domestic terrorism losses—that determine counterterrorism allocations. Market failures associated with preemptive and defensive measures may be jointly ameliorated by a disadvantaged defender. Nevertheless, the subgame perfect equilibrium will still be suboptimal since externalities are not fully internalized.