The 'price' of terrorism

Phillips, Peter J. (2005) The 'price' of terrorism. Defence and Peace Economics, 16 (6). pp. 403-414. ISSN 1024-2694

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Security measures are said to increase the price of terrorism. This price has not hitherto been defined in an economically meaningful way. This paper provides a precise
definition by treating the terrorists' resource endowment as a parcel of contingent claims to political influence with a price equal to the summed value of those contingent claims in potential states of the world. Equipped with this definition, an equilibrium model of the price of terrorism is constructed. Important insights are gained into the effect of terrorists'risk aversion on the level of the price of terrorism in different states of the world and the theoretical conclusion reached that higher security is associated with a lower price of
terrorism rather than a higher price. The implications for policy are discussed.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Deposited according to Publisher's requirements.
Faculty / Department / School: Historic - Faculty of Business - Department of Finance and Banking
Date Deposited: 11 Oct 2007 00:20
Last Modified: 02 Jul 2013 22:32
Uncontrolled Keywords: terrorism, price of terrorism, resource endowment, contingent claims, political influence
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150299 Banking, Finance and Investment not elsewhere classified
16 Studies in Human Society > 1606 Political Science > 160604 Defence Studies
Identification Number or DOI: 10.1080/10242690500115931

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