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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
‘Look like the innocent flower, but be the serpent under’t’: mimicking behaviour of growth-oriented terrorist organizations
TL;DR: In this paper, the authors examined the interaction between a growth-oriented terrorist organization and an uninformed government based on a two-period signalling game and showed that, if a terrorist group follows a growth strategy, it has an incentive to appear weaker than it is by mimicking the behaviour of a smaller organization.
Terrorism, Media Coverage and Education: Evidence from Al-Shabaab Attacks in Kenya
TL;DR: In this article , a simple structural model was proposed to examine how terrorism alters the demand for education through perceived risks and returns in the context of media signal coverage and schooling in Kenya and found that media access reinforces negative effects of terrorism on schooling.
The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)
Friedrich Schneider,Tilman Brück,Daniel Meierrieks +2 more
TL;DR: The economics of terrorism and counter-terrorism survey provides an in-depth analysis of existing research on the economic analysis of terrorism and counter-terrorist measures. It covers various aspects including the causes and consequences of terrorism, the interrelation between the economy and security, and the impact of terrorism on the economy and consumer behavior.
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Terrorism and Employment: Evidence from Successful and Failed Terror Attacks
Abel Brodeur,Marie Connolly,Serge Coulombe,Catherine Deri Armstrong,Jason Garred,Anthony Heyes,Louis-Philippe Morin,Francesca Rondina +7 more
TL;DR: This article examined the economic consequences of terrorism and the channels through which terrorism affects local economies and found that successful attacks, in comparison to failed attacks, reduce the number of jobs in targeted counties by approximately 5% in the year the attack takes place.
References
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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.
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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