Modeling Adversaries in Counterterrorism Decisions Using Prospect Theory

Jason R. W. Merrick and Philip Leclerc

Risk Analysis, 2016, vol. 36, issue 4, 681-693

Abstract: Counterterrorism decisions have been an intense area of research in recent years. Both decision analysis and game theory have been used to model such decisions, and more recently approaches have been developed that combine the techniques of the two disciplines. However, each of these approaches assumes that the attacker is maximizing its utility. Experimental research shows that human beings do not make decisions by maximizing expected utility without aid, but instead deviate in specific ways such as loss aversion or likelihood insensitivity. In this article, we modify existing methods for counterterrorism decisions. We keep expected utility as the defender's paradigm to seek for the rational decision, but we use prospect theory to solve for the attacker's decision to descriptively model the attacker's loss aversion and likelihood insensitivity. We study the effects of this approach in a critical decision, whether to screen containers entering the United States for radioactive materials. We find that the defender's optimal decision is sensitive to the attacker's levels of loss aversion and likelihood insensitivity, meaning that understanding such descriptive decision effects is important in making such decisions.

Date: 2016
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https://doi.org/10.1111/risa.12254

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Persistent link: https://EconPapers.repec.org/RePEc:wly:riskan:v:36:y:2016:i:4:p:681-693

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