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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
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Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency
TL;DR: In this article, the authors used micro-level data from agricultural surveys during the period of insurgency in Punjab (India), and found significant negative effects of terrorism on the level of investment in long-term agricultural technology but effects are small and insignificant for short-term investment.
Terrorism and Country-Level Global Business Failure
TL;DR: In this paper, the authors investigated the relationship between terrorism and country-level global business failure and found that terrorism is negatively and significantly associated with business failure in developing and fragile states only.
Global terror, well-being and political attitudes
TL;DR: In this article, the effect of global terror intensity on the life satisfaction of Western citizens was studied, and the effect was particularly strong for events broadcasted on Western television, when respondents are physically or genetically close to the victims, or for individuals who feel more exposed (e.g. living in urban areas).
References
Prospect theory: an analysis of decision under risk
Daniel Kahneman,Amos Tversky +1 more
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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Judgment Under Uncertainty: Heuristics and Biases
Amos Tversky,Daniel Kahneman +1 more
- 01 Jan 1974
TL;DR: The authors described three heuristics that are employed in making judgements under uncertainty: representativeness, availability of instances or scenarios, and adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
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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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The Framing of Decisions and the Psychology of Choice
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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