Safety at What Price?: Setting Anti-terrorist Policies for Checked Luggage on Us Domestic Aircraft Acknowledgments

In this thesis, we considered the costs and benefits of implementing Positive Passenger Bag Match (PPBM) an anti-terrorist measure to keep bombs out of checked luggage on US domestic passenger flights. We constructed a stochastic model for comparing the cost-effectiveness of three alternative approaches to PPBM: no PPBML implementation; a PPBM imlementation that is applied to 5% of passengers; and a full (100%) implementation of PPBM. We made ranges of estimates concerning the level of terrorist risk, the costs of PPBM operation, the consequences of successful terrorist bombings, and the anti-terrorist effectiveness of both the partial and full PPBM implementations. Calculations showed that there were circumstances under which each policy was the most cost-effective of the three. Of the three options, not implementing PPBM at all was the most cost-effective approach for the largest percentage of the scenarios considered. We found that 5% PPBM captured the next largest portion of the scenarios, and was generally the optimal strategy when annual PPBMI operation costs were low, when 5% PPBM anti-terrorist effectiveness was high, and when the consequences of successful bombings were severe. We found 100%(. PPBM to be the optimal strategy for most scenarios which involved highly costly terrorist bombings, a high level of terrorist risk, and a 100% PPBM policy that provided much added security over 5% PPBM. Thesis Supervisor: Arnold I. Barnett Title: George Eastman Professor of Management Science Sloan School of Management