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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
The dislocations of terror: Assessments of risk during the Second Intifada.
Seymour Spilerman,Guy Stecklov +1 more
TL;DR: The present study explores the Israeli experience with chronic terror and explores whether distance from the site of an attack, and similarity of a contemplated undertaking to the target of a recent attack, influence decision making in a context of chronic terror.
Stress and smoking: associations with terrorism and causal impact
TL;DR: Camacho et al. as mentioned in this paper analyzed the effects of the Oklahoma City bombing and 9/11 terrorist attacks on stress, smoking, and smoking quit attempts using 1,657,985 observations from the Behavioral Risk Factor Surveillance System.
The Importance of Psychology in Economic Activity: Evidence from Terrorist Attacks
TL;DR: This paper found that exposure to foreign terrorist attacks leads to substantial declines in trust, subjective well-being, and the importance of creativity and freedom, and when foreign-born populations have greater exposure to terrorism, local economic output and household income increase.
Is terrorism eroding agglomeration economies in Central Business Districts? Lessons from the office real estate market in downtown Chicago ✩
Alberto Abadie,Sofia Dermisi +1 more
TL;DR: In this article, the authors investigate the impact of an increased perception of terrorist risk after 9/11 on the office real estate market in downtown Chicago and show that, following the attacks, vacancy rates experienced a much more pronounced increase in the three most distinctive Chicago landmark buildings (the Sears Tower, the Aon Center and the Hancock Center) and their vicinities than in other areas of Chicago.
Examining the impact of pacification on informal entrepreneurs in Brazilian favelas
Pankaj C. Patel,Jack I. Richter,Marcus T. Wolfe +2 more
TL;DR: Exogeneous crime reduction does not significantly improve income outcomes for informal entrepreneurs in Brazilian favelas.
References
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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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Amos Tversky,Daniel Kahneman +1 more
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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.
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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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