Working Paper

The interplay between preemptive and defensive counterterrorism measures: a two-stage game

Abstract: A two-stage game depiction of counterterrorism is presented, where the emphasis is on the interaction between the preemptive and defensive measures taken by two targeted countries facing a common threat. The preemptor is likely 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, and targeting risks - that determine counterterrorism allocations. The study shows that the market failures associated with preemptive and defensive countermeasures may be jointly ameliorated by a disadvantaged defender. Nevertheless, the subgame perfect equilibrium will still be suboptimal owing to a preemption choice that does not fully internalize the externalities.

Keywords: Terrorism; War - Economic aspects;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2009

Number: 2008-034