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Fear and the Response to Terrorism: An Economic Analysis ∗
Gary S. Becker,Yona Rubinstein +1 more
TL;DR: In this paper, the authors aim at explaining why small probability events such as being harmed by terrorism affect peoples' behavior so much, by generating fear, persons' utility and well-being.
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Abstract: In this project we aim at explaining why small probability events such as being harmed by terror affect peoples’ behavior so much. Our argument is based on two corner stones. Terror affects not only the likelihood to be harmed but mainly, by generating fear, persons’ utility and well-being. Yet, fear can be handled and managed by accumulating required mental skills. Like other investments in human capital, it is not a "free-lunch" and it does not pay back the same to anyone. Individuals who had previously consumed large quantities of what turned to be a risky good, invest, overcome fear, and keep their consumption plans unchanged, especially when risk is negligible, while others substitute the risky activity by other consumption plans, falsely appearing as if they overstate the objective probability to be harmed. Data from the US and from Israel support out theory. For instance, using micro data on public bus routes and taxis we find that suicide bomber attacks carried out on buses have a substantial negative average effect on bus rides and positive effect on the use of taxis. By disaggregating the population into low and high frequency users we find no effect of suicide bomber attacks
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Citations
Adaptation patterns and consumer behavior as a dependency on terror
TL;DR: In this article, Kirschenbaum et al. found the existence of an adaptation trend among the consumer public after a terrorist incident, and the adaptation is faster in regard to non-durable goods than to durable goods.
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•Posted Content
The Effects of Local Violent Crime on High-Stakes Tests
Eunsik Chang,María Padilla-Romo +1 more
TL;DR: In this article, the effects of exposure to local violent crime on high-stakes standardized test outcomes in the context of Mexico City's centralized high school admission system were investigated. And they showed that exposure to violent crime reduces test scores for female students but not for males, leading to a gender biased high school placement.
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•Posted Content
Stress and Coping - An Economic Approach
TL;DR: The authors predict the occurrence and frequency of uncontrolled emotional outbursts as a function of an individual's personality and environment, and the effect of psychotherapy shows that expecting little and being emotional can help maximizing well-being.
Understanding Optimal Investment in Cyber Terrorism: A Decision Theoretic Approach
Tridib Bandyopadhyay
- 01 Apr 2011
TL;DR: This work develops and explains a set of economic models under the decision theoretic framework to conceptualize the requisite levels of investment in the defense against cyber terrorism and presents the optimal bifurcation of budget between the prevention and detection regimes should the defending nation possesses adequate funds to deploy layered defense in cyber terrorism.
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TL;DR: In this paper, the authors present a critique of expected utility theory as a descriptive model of decision making under risk, and develop an alternative model, called prospect theory, in which value is assigned to gains and losses rather than to final assets and in which probabilities are replaced by decision weights.
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Prospect Theory: An Analysis of Decision Under Risk
Daniel Kahneman,Amos Tversky +1 more
TL;DR: Prospect Theory as mentioned in this paper is an alternative theory of individual decision making under risk, developed for simple prospects with monetary outcomes and stated probabilities, in which value is given to gains and losses (i.e., changes in wealth or welfare) rather than to final assets, and probabilities are replaced by decision weights.
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Amos Tversky,Daniel Kahneman +1 more
TL;DR: The psychological principles that govern the perception of decision problems and the evaluation of probabilities and outcomes produce predictable shifts of preference when the same problem is framed in different ways.
Advances in prospect theory: cumulative representation of uncertainty
Amos Tversky,Daniel Kahneman +1 more
TL;DR: Cumulative prospect theory as discussed by the authors applies to uncertain as well as to risky prospects with any number of outcomes, and it allows different weighting functions for gains and for losses, and two principles, diminishing sensitivity and loss aversion, are invoked to explain the characteristic curvature of the value function and the weighting function.
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