Strategic Analysis of Terrorism

Two areas that are increasingly studied in the game-theoretic literature on terrorism and counterterrorism are collective action and asymmetric information. One contribution of this chapter is a survey and extension of continuous policy models with differentiable payoff functions. In this way, policies can be characterized as strategic substitutes (e. g., proactive measures), or strategic complements (e. g., defensive measures). Mixed substitute–complement models are also introduced. We show that the efficiency of counterterror policy depends upon (i) the strategic substitutes-complements characterization, and (ii) who initiates the action. Surprisingly, in mixed-models the dichotomy between individual and collective action may disappear. A second contribution is the consideration of a signaling model where indiscriminant spectacular terrorist attacks may erode terrorists’ support among its constituency, and proactive government responses can create a backlash effect in favor of terrorists. A novel equilibrium of this model reflects the well-documented ineffectiveness of terrorism in achieving its stated goals.