balancing terrorism and natural disasters defensive strategy with endogenous attacker effort in this paper we apply game theory to identify equilibrium strategies for both attacker and defender in a fully endogenous model of resource allocation for countering terrorism and natural disasters the key features of our model include balancing protection from terrorism and natural disasters and describing the attacker choice by a continuous level of effort rather than a discrete choice i e attack or not interestingly in a sequential game increased defensive investment can lead an attacker to either increase his level of effort to help compensate for the reduced probability of damage from an attack or decrease his level of effort because attacking has become less profitable this can either reduce or increase the effectiveness of investments in protection from intentional attack and can therefore affect the relative desirability of investing in protection from natural disasters

intrinsic motivation in public service theory and evidence from state supreme courts abstractthis paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges we construct a panel data set using published decisions from all state supreme courts from 1947 to 1994 we estimate the effects of changes in judges employment conditions on a number of measures of judicial performance the results are consistent with the hypothesis that judges are intrinsically motivated to provide high quality decisions and that at the margin they prefer quality over quantity when judges face less time pressure whether from the introduction of an intermediate appellate court the weakening of electoral demands or an increased salary they write more well researched opinions that are cited more often by other judges these effects are strongest when judges have more discretion to select their portfolios of cases

changing threat perceptions and the efficient provisioning of international security this paper proposes a mechanism for structuring international institutions to efficiently provision global security against the threat of a rogue nation the effects of security effort by an alliance member are assumed to be non rival and non excludable for other members specifically this effort has both positive and negative effects as security measures prevent attacks by the rogue nation but also involves loss of commercial and diplomatic benefits further the alliance members are assumed to have heterogeneous tastes regarding the desired security level the allies act strategically vis a vis one another with regard to security provision and the alliance a whole acts strategically with respect to the rogue nation which strategizes in turn importantly this paper investigates how the evolution of public opinion in the respective countries facing the rogue nation s threat impacts the proposed mechanism

to bargain or not to bargain that is the question we use economic analysis in a simple game theory framework to ascertain under what circumstances a government would want to precommit itself to a no negotiation strategy from the government viewpoint we examine both the choice of deterrence expenditure i e expense meant to reduce terrorist logistical success during incidents and whether to negotiate or not this abstract was borrowed from another version of this item

contracting in the shadow of the law economic models of contract typically assume that courts enforce obligations based on verifiable events corresponding to the legal rule of specific performance as a matter of law this is not the case this leaves open the question of optimal contract design given the available remedies used by the courts this article shows that american standard form construction contracts can be viewed as an efficient mechanism for implementing building projects given existing legal rules it is shown that a central feature of these contracts is the inclusion of governance covenants that shape the scope of authority and regulate the ex post bargaining power of parties our model also implies that the legal remedies of mistake impossibility and the doctrine limiting damages for unforeseen events developed in the case of hadley v baxendale are efficient solutions to the problem of implementing complex exchange

terrorism in a bargaining framework a lthough hostage seizures are a small percentage of terrorist incidents they represent some of the most spectacular and influential events 2 the takeover of the american embassy in tehran on november 14 1979 the seizure of eleven dpec oil ministers on december 21 1975 and the capture and killing of nine israeli athletes on september 5 1972 are incidents not easily forgotten from 1968 through 1982 of the approximately 8 000 reported terrorist events 540 7 percent were transna

the impact of disaster on the strategic interaction between company and government a company allocates a resource between safety effort and production the government earns taxes on production the disaster probability is modeled as a contest between the disaster magnitude and the two players safety efforts the model illustrates that safety efforts are strategic substitutes and inverse u shaped in the disaster magnitude the company s safety effort increases and the government s safety effort decreases in taxation taxation can ameliorate companies free riding on governments safety efforts with sufficiently large production the government prefers and the company does not prefer raising taxation above 0 for the government an upper limit usually exists above which taxation cannot be profitably increased the model shows how both or no players exert safety efforts when the disaster magnitude is small and large respectively and how they free ride on each other s safety efforts when the disaster magnitude is intermediate the company free rides when the unit production cost is low so that the large profits outweigh the negative impact of the disaster with endogenized taxation determined by the government the tax rate decreases in the disaster magnitude the unit production cost the government s unit cost of safety effort and how the company is negatively affected by the disaster the tax rate increases in the company s resource and how the government is negatively affected by the disaster the tax rate is weakly u shaped in the company s unit safety effort the model is illustrated with numerical examples and with the oil spill disasters by bp in 2010 and by exxon valdez in 1989

can markets stimulate rights on the alienability of legal claims the alienability of legal claims holds the promise of increasing access to justice and fostering development of law i develop a principal agent framework where litigation funders provide expertise in reducing uncertainty in agents disutility of production the model leads to the counterintuitive prediction that litigation funders prefer cases with novel issues and social surplus is positively correlated with legal uncertainty consistent with the model court backlog court expenditures and a slowing in average time to completion are associated with third party funding cases with third party funding receive more citations and are reversed less often than comparable cases without such arrangements

on the value of exposure and secrecy of defense system first mover advantage vs robustness abstract it is commonly accepted in the literature that when facing with a strategic terrorist the government can be better off by manipulating the terrorist s target selection with exposing her defense levels and thus moving first however the impact of terrorist s private information may significantly affect such government s first mover advantage which has not been extensively studied in the literature to explore the impact of asymmetry in terrorist s attributes between government and terrorist on defense equilibrium we propose a model in which the government chooses between disclosure sequential game and secrecy simultaneous game of her defense system our analysis shows that the government s first mover advantage in a sequential game is considerable only when both government and terrorist share relatively similar valuation of targets in contrast we interestingly find that the government no longer benefits from the first mover advantage by exposing her defense levels when the degree of divergence between government and terrorist valuation of targets is high this is due to the robustness of defense system under secrecy in the sense that all targets should be defended in equilibrium irrespective of how the terrorist valuation of targets is different to government we identify two phenomena that lead to this result first when the terrorist holds a significantly higher valuation of targets than the government s belief the government may waste her budget in a sequential game by over investing on the high valued targets second when the terrorist holds a significantly lower valuation of targets the government may incur a higher expected damage in a sequential game because of not defending the low valued targets finally we believe that this paper provides some novel insights to homeland security resource allocation problems

the investment problem in terrorism evidence from early terrorist groups reveals a structural equivalence between extortion and terrorism this allows us to draw conclusions from the theory of extortion that can be applied to a theory of terrorism concerning the role of repeated play in the viability of extortion it also enables us to analyse the role of commitment in destroying the extortionary organization

conciliation counterterrorism and patterns of terrorist violence what causes the increase in terrorism that reportedly often follows gov ernment concessions given this pattern why do governments ever conciliate terror ists i propose a model in which terrorist organizations become more militant following concessions because only moderate terrorists accept them leaving extremists in con trol governments nonetheless are willing to make concessions because their coun terterror capabilities improve because of the collusion of former terrorists former terrorists undertake this collusion to insure the credibility of government promises the model also yields hypotheses regarding the level of government investment in counterterror when moderates accept concessions the terms of negotiated settle ments the duration of terrorist conflicts incentives for moderate terrorists to radical ize their followers and incentives for governments to encourage extremist challenges to moderate terrorist leaders the model is illustrated with an application to the israeli0 palestinian conflict

on some recent explanations of why capital hires labor conventional microeconomics contains no explanation of why capital hires labor and not the reverse in view of some surprisingly positive results in the theoretical analysis of worker run enterprise systems recent contributions to the theory of the firm have attempted to explain the dominance of capitalist production relations in efficiency terms the present paper critically reviews works in this area by alchian and demsetz 1972 williamson 1975 1980 and jensen and meckling 1979 and contends that a convincing efficiency argument for the general superiority of capital owners over workers control of enterprises still is lacking

immigration policy and counterterrorism abstract in a developing country terrorists recruit and allocate their capital skilled labor and unskilled labor between domestic and foreign targets domestic targets require less skilled labor than foreign targets under various strategic scenarios we show how countermeasures against the different terrorist inputs alter the amount and mix of targets as well as how skilled and unskilled immigration quotas by a targeted foreign country affect this mix of attacks we find that increases in skilled labor quotas generally reduce terrorist attacks in the foreign country especially when the terrorists reside in a skill scarce country a number of different strategic scenarios including leader follower are investigated

intimidation linking negotiation and conflict challenger demands a resource from defender in each period challenger chooses whether to attack if attacked defender chooses whether to concede the resource forever each player might be committed to ghting until victory before con ict begins defender can make nitely many offers con ict begins if challenger rejects all offers in equilibrium all offers except the last are unacceptable negotiation cannot eliminate con ict because a larger offer makes con ict increasingly attractive for challenger if negotiation fails prolonged con ict can happen in equilibrium even when uncertainty is vanishingly small we provide comparative statics regarding the probability and length of con ict

torture in counterterrorism agency incentives and slippery slopes abstract we develop a counterterrorism model to analyze the effects of allowing a government agency to torture suspects when evidence of terrorist involvement is strong we find that legalizing torture in strong evidence cases has offsetting effects on agency incentives to counter terrorism by means other than torture it lowers these incentives because the agency may come to rely on torture to avert attacks however it also increases these incentives because other efforts may increase the probability of having strong enough evidence to warrant the use of torture legalizing torture in strong evidence cases is more likely to reduce non torture efforts if these efforts are more effective at stopping attacks and less effective at turning up strong evidence when the suspect is guilty if it reduces non torture efforts it can reduce security and is more likely to do so if the attack threat is higher moreover if torture is used in strong evidence cases even if torture is banned legalizing torture in strong evidence cases necessarily reduces security if it reduces non torture efforts lastly it can increase incentives to torture even in weak evidence cases a slippery slope

balancing congestion and security in the presence of strategic applicants with private information concerns on security and congestion appear in security screening which is used to identify and deter potential threats e g attackers terrorists smugglers spies among normal applicants wishing to enter an organization location or facility generally in depth screening reduces the risk of being attacked but creates delays that may deter normal applicants and thus decrease the welfare of the approver authority manager screener in this paper we develop a model to determine the optimal screening policy to maximize the reward from admitting normal applicants net of the penalty from admitting bad applicants we use an m m 1 queueing system to capture the impact of security screening policies on system congestion and use game theory to model strategic behavior in which potential applicants with private information can decide whether to apply based on the observed approver s screening policy and the submission behavior of other potential applicants we provide analytical solutions for the optimal non discriminatory screening policy and numerical illustrations for both the discriminatory and non discriminatory policies in addition we discuss more complex scenarios including imperfect screening abandonment behavior of normal applicants and non zero waiting costs of attackers

collective action and transnational terrorism this paper applies modern tools of economic analysis to examine the nature of transnational terrorism and associated collective action concerns that arise in the aftermath of september 11 throughout the paper the strategic interaction between rational terrorists and targeted governments are underscored networked terrorists draw on their collective strengths to exploit a maximum advantage over targeted governments inadequate and uncoordinated responses a wide range of issues are explored including governments deterrence races undersupplied pre emption and suicidal attacks myriad substitutions by terrorists limit government anti terrorism policy effectiveness a host of policy responses are evaluated in light of economic analysis and past econometric evidence

introduction advances in the study of the economics of terrorism although the study of the economics of terrorism dates back to 1978 work on this topic was sporadic until 2001 since the four hijackings on september 11 2001 there have been many contributions both theoretical and empirical in this area of study the purpose of this article is twofold i to orient the reader to this area of study and ii to introduce the five articles of this special symposium these articles address diverse aspects of the economics of terrorism including the demise of terrorist groups natural disasters and terrorism cost of living and terrorism terrorism and stock bond returns and terrorism and piracy

exploring the dynamics between terrorism and anti terror spending theory and uk evidence abstract recent years have seen governments restricting civic freedoms and legislating significant increases in spending to combat terrorist activities in this paper we investigate the relationship between anti terror spending and terrorism in line with previous findings in the empirical literature on terrorist activity our game theoretic model of the interaction between a benevolent government and a terrorist organization is suggestive of a non linear relation between terrorism and counter terrorism spending using uk data our empirical markov switching implementation provides evidence in favor of this approach the empirical results also show that the probability of transiting into a state with high terror is smaller if defense spending is high

modeling secrecy and deception in a multiple period attacker defender signaling game abstract in this paper we apply game theory to model strategies of secrecy and deception in a multiple period attacker defender resource allocation and signaling game with incomplete information at each period we allow one of the three possible types of defender signals truthful disclosure secrecy and deception we also allow two types of information updating the attacker updates his knowledge about the defender type after observing the defender s signals and also after observing the result of a contest if one occurs in any given time period our multiple period model provides insights into the balance between capital and expense for defensive investments and the effects of defender private information such as defense effectiveness target valuations and costs and also shows that defenders can achieve more cost effective security through secrecy and deception possibly lasting more than one period in a multiple period game this paper helps to fill a significant gap in the literature in particular to our knowledge no past work has studied defender secrecy and deception in a multiple period game moreover we believe that the solution approach developed and applied in this paper would prove useful in other types of multiple period games

multi objective stackelberg game model for water supply networks against interdictions with incomplete information abstract water supply networks are infrastructures pivotal to economic development and living standards of which the increasing complexity and interdependencies have brought challenges for the protection and enhancement of water supplies we address the problem on how to defend water supply networks with hydraulic characteristics against an interdictor by building a multi objective stackelberg game model with incomplete information in this model the defender and the interdictor both considered as rational players choose a subset of network components to defend or interdict based on their payoffs the defender with incomplete information on the interdictor s efforts initiates to trade off the two objectives of maximizing the expected network satisfaction rate and of minimizing defense efforts whereas the interdictor with no information on network operational capacity follows to trade off the objectives of minimizing the expected network efficiency and of minimizing interdiction efforts the algorithm of determining the final optimal defense strategies is presented which consists of three steps 1 develop the strategy sets by the assessments of network vulnerability and resilience 2 analyze the equilibrium through a nested heuristic genetic algorithm and 3 determine the final optimal defense strategy based on the minimax regret approach a case study of d town water supply network demonstrates the practical significance of the proposed approach furthermore the impacts of the incomplete information are analyzed to provide suggestions on the defense strategy making

the evolution of common law we present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost we find a cost and a benefit of diversity of judicial views policy motivated judges distort the law away from efficiency but diversity of judicial views also fosters legal evolution and increases the law s precision we call our central finding the cardozo theorem even when judges are motivated by personal agendas legal evolution is on average beneficial because it washes out judicial biases and renders the law more precise our paper provides a theoretical foundation for the evolutionary adaptability of common law

the life cycle of worker owned firms in market economies a theoretical analysis abstract the population of worker owned firms is likely to grow countercyclically in contrast with capitalist firms many worker owned firms are born during recessions frequently out of capitalist firms and are transformed into capitalist firms during economic booms there exists an offsetting tendency as worker owned firms are formed during periods of sustained increase in the standard of living and are dissolved during economic decline these are some of the conclusions of a theoretical analysis of the obstacles to the formation and relative efficiency attributes of worker owned and capitalist firms carried out in a dynamic framework emphasizing the influence of changes in the environment on organizational life cycles

is piracy sustainable we develop a model of international trade between three countries one of which hosts pirates when the number of pirate ships increases the probability for one of the pirate ships for one commercial ship encountering a commercial pirate ship decreases increases then the commercial ships have an incentive to spend more on defense and pirate ships to invest less on attack if pirates operate under free entry they do not internalize the entry externality then their number rises until it reaches a level such that their attack power has become negligible and the defense of the commercial ships has reached a high level the economy settles in a full deterrence equilibrium however if the number of pirate ships is controlled by an authority which maximizes their total profit the economy settles in an equilibrium where piracy is active and commercial ships spend less on defense piracy is a substitute for trade piracy depends on the terms of trade of the pirate country and on the relative efficiency of the attack versus the defense

counterterrorism strategies in the lab we conduct experiments to test the collective action dilemmas associated with defensive and proactive counterterror strategies defensive policies are associated with creating public bads e g a commons whereas proactive policies are akin to the voluntary provision of public goods when combined the inefficiency of collective action is exacerbated resulting in a situation known as a prisoner s dilemma squared pd2 deterministic versus probabilistic equivalent versions of the associated externalities are compared within a laboratory setting experimental results reveal that the collective action problem associated with counterterror strategies is deepened in uncertain environments and is indeed a robust regularity that is not easily overcome as individuals gain more experience they become even more self interested

learning while setting precedents a decision maker dm must address a series of problems over time each period a random case arises and the dm must make a yes or no decision which we call a ruling she is uncertain about the correct ruling until she conducts a costly investigation a ruling establishes a precedent which may be costly to violate in the future we compare the dm s incentive to acquire information the evolution of standards and the social welfare under two institutions nonbinding precedent and binding precedent under nonbinding precedent the dm is not required to follow previous rulings but under binding precedent she must follow previous rulings where applicable we find that compared to nonbinding precedent the incentive for information acquisition is stronger under binding precedent in earlier periods when few precedents exist but as more precedents are established over time the incentive for information acquisition becomes weaker under binding precedent even though erroneous rulings may be perpetuated under binding precedent social welfare can be higher because of the more intensive investigation conducted early on

a strategic analysis of the war against transnational terrorism abstract we study a two stage game in which a transnational terrorist organization interacts with an arbitrary number of countries that may differ in their political or economic power their military effectiveness the benefit from cooperating against terrorism and the value they assign to damage only a subset of countries that emerges endogenously takes proactive measures to fight the terrorist while all countries incur defensive expenditures to protect their soil we characterize analytically the pure strategy subgame perfect equilibrium of the game and show how the equilibrium strategies depend on the key model parameters we provide an algorithm to find the endogenous set of cooperating countries based on their benefit from cooperation and their political economic power

deterrence preemption and panic a common enemy problem of terrorism we develop a game theoretic analysis of terrorism that examines the interaction between a terrorist organization and multiple target countries and considers both pre emption and deterrence as counter terrorist policies the damage from terror includes not only the material cost of fatality injury and loss of property but also the resultant fear the fear effect leads to different kinds of equilibria and implications for counter terrorism policies in particular the model identifies conditions under which greater pre emption may be the rational response to an increase in terrorism i e it analyzes the merit of the dictum offense is the best defense further it examines the characteristics of cooperative behavior among target countries in dealing with the threat of terrorism

the interplay between preemptive and defensive counterterrorism measures a two stage game a two stage game depiction of counterterrorism is presented emphasizing the interaction between preemptive and defensive measures taken by two commonly targeted countries the preemptor is apt to be the high cost defender with the greater foreign interests a prime target country may also assume the preemptor role the analysis identifies key factors cost comparisons foreign interests targeting risks and domestic terrorism losses that determine counterterrorism allocations market failures associated with preemptive and defensive measures may be jointly ameliorated by a disadvantaged defender nevertheless the subgame perfect equilibrium will still be suboptimal since externalities are not fully internalized

the role of dispute settlement procedures in international trade agreements although disputes are typically treated as synonymous with concerns about enforcement in economic models of trade agreements in reality most wto disputes seem to concern the interpretation of vague provisions or instances where the agreement is silent and some have suggested that the wto s dispute settlement body dsb could usefully grant exceptions to rigid contractual obligations these activist dsb roles could help complete an incomplete contract but how activist should the dsb be should dsb rulings set precedent we address these questions by characterizing the optimal choice of contract form and dsb mandate under various contracting conditions jel codes d02 d78 d86 f13 k12 k33

critical infrastructure protection using secrecy a discrete simultaneous game abstract in this research critical infrastructure protection against intentional attacks is modeled as a discrete simultaneous game between the protector and the attacker to model the situation that both players keep the information of their resource allocation secret we prove that keeping the information regarding protection strategies secret can obtain a better effect of critical infrastructure protection than truthfully disclosing it solving a game theoretic problem even in the case of two players has been known to be intractable to deal with this complexity after proving that pure strategy nash equilibrium solutions do not exist for the proposed simultaneous game a new approach is proposed to identify its mixed strategy nash equilibrium solution

insurance self protection and the economics of terrorism abstract this paper investigates the rationale for public intervention in the terrorism insurance market it argues that government subsidies for terror insurance have the effect of discouraging self protection and limiting the negative externalities associated with self protection cautious self protective behavior by a target can hurt public goods like national prestige if it is seen as giving in to the terrorists and may increase the loss probabilities faced by others by encouraging terrorists to substitute toward more vulnerable targets we argue that these externalities in protection are essential for normative analysis of government intervention in insurance markets and may also explain why availability problems in this market have engendered much stronger government responses than similar problems in other catastrophe insurance markets

terrorism key assets and critical infrastructures to protect or to rebuild that is the question both the choice between stick and carrot and the tension between control and preservation of civil liberties characterize the policy debate over counterterrorism arguing for the carrot and preservation of civil liberties viewpoint frey and rohner def peace econ 18 3 245 252 2007 propose strategic reconstruction as an alternative to protection our paper provides a comparative analysis of these two policies first we study the rationality of the public s expectations and we show that credible strategic reconstruction may deter terrorist attacks next we derive conditions under which strategic reconstruction is more efficient than protection finally we show that strategic reconstruction may reinforce the efficiency of protection

conflict and rent seeking success functions ratio vs difference models of relative success the rent seeking competitions studied by economists fall within a much broader category of conflict interactions that also includes military combats election campaigns industrial disputes lawsuits and sibling rivalries in the rent seeking literature each party s success pi which can be interpreted either as the probability of victory or as the proportion of the prize won has usually been taken to be a function of the ratio of the respective resource commitments alternatively however pi may instead be a function of the difference between the parties commitments to the contest the contest success function csf for the difference from is a logistic curve in which as is consistent with military experience increasing returns apply up to an inflection point at equal resource commitments a crucial flaw of the traditional ratio model is that neither onesided submission nor two sided peace between the parties can ever occur as a cournot equilibrium in contrast both of these outcomes are entirely consistent with a model in which success is a function of the difference between the parties resource commitments

revenge or continued attack and defense in defender attacker conflicts abstract existing literature has demonstrated that exacting revenge can have a self deterrence effect and a value of revenge effect the former means that each player will decrease effort when competing for a resource because of fear of a rival s revenge while the latter implies that each player will increase effort in the revenge period moreover the self deterrence effect could outweigh the value of revenge effect implying that revenge could be helpful in stabilizing conflicts a phenomenon known as the paradox of revenge we re examine the two effects and the paradox of revenge in defender attacker conflicts considering a scenario in which a defender and only the defender who was attacked in the first period takes revenge on the attacker in the subsequent period we demonstrate that whether or not these results hold depends on how much the defender values revenge and the difference between the two players efficiencies of effort more interestingly we show that a sufficiently large revenge value for the defender can deter an attack from the attacker in the first place

legal realism for economists abstract economists have made great progress in understanding the incentives and behavior of actors who operate outside of traditional economic markets including voters legislators and bureaucrats the incentives and behavior of judges however remain largely opaque do judges act as neutral third party enforcers of substantive decisions made by others are judges ordinary policymakers who advance whatever outcomes they favor without any special consideration for law as such emerging recent scholarship has started to explore more nuanced conceptions of how law facts and judicial preferences may interact to influence judicial decisions this work develops a perspective on judging that can usefully be understood as the modern manifestation of american legal realism a jurisprudential movement of lawyers judges and law professors that flourished in the early twentieth century the purpose of this essay is to introduce in simplified form the realist account of judicial decision making to contras

terror networks and trade does the neighbor hurt abstract this paper studies how network related terrorism redistributes trade flows across countries including those countries that are not a direct source of terror we first develop a game theoretical framework with imperfect information on the spatial location of transnational terrorism to show how the resulting security measures produce a non monotonic effect on the distribution of trade across countries neighbors adjacent to terror even when they do not source it have trade reduced through enhanced security measures while countries farther away benefit from those security measures second to empirically assess the distortional effects of terrorism on trade we first estimate the structural gravity equation derived from our theory then armed with the estimates of the partial effect of neighbor terror on bilateral trade we perform a counterfactual experiment and confirm the non monotonic general equilibrium effect of neighbor terror on trade

why has regional income convergence in the u s declined the past thirty years have seen a dramatic decrease in the rate of income convergence across states and in population flows to wealthy places these changes coincide with 1 an increase in housing prices in productive areas 2 a divergence in the skill specific real returns to living in productive places 3 a redirection of low skilled migration and 4 diminished human capital convergence due to migration we develop a model where falling housing supply elasticity and endogenous labor mobility generates these patterns using a new panel measure of housing supply regulations we demonstrate the importance of this channel income convergence continues in less regulated places while it has stopped in more regulated places

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

is capitalism necessary a critique of the neoclassical economics of organization abstract in recent years neoclassical economists have offered a theory of the capitalist firm which implies that the corporation is uniquely adapted to the complexities of the modern industrial economy hence it is argued capitalism is necessary to efficiency this paper designs a non capitalist firm that satisfies all the criteria for efficiency unumerated by the neoclassical institutional economists the design suggests that by separating capitalism from the capital market advocates of non capitalist market systems need not discard the capital market as an instrument of economic control

using the law to change the custom the custom often acts as a powerful hindrance to equity increasing changes in this paper we present a simple model of legal dualism in which a progressive legal reform can under certain conditions shift the conflicting custom in the direction intended by the legislator formal law then acts as an outside anchor that exerts a magnet effect on the custom we also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population we illustrate our insights using examples on inheritance marriage and divorce in sub saharan africa and india

a test of racial bias in capital sentencing this paper proposes a test of racial bias in capital sentencing based upon patterns of judicial errors in lower courts we model the behavior of the trial court as minimizing a weighted sum of the probability of sentencing an innocent and that of letting a guilty defendant free we de ne racial bias as a situation where the relative weight on the two types of errors is a function of defendant and or victim race the key prediction of the model is that if the court is unbiased ex post the error rate should be independent of the combination of defendant and victim race we test this prediction using an original dataset that contains the the race of the defendant and of the victim s for all capital appeals that became nal between 1973 and 1995 we nd robust evidence of bias against minority defendants who killed white victims in direct appeal and habeas corpus the probability of error in these cases is 3 and 9 percentage points higher respectively than for minority defendants who killed minority victims

hiding in plain sight using signals to detect terrorists this paper studies the interaction between a governmental security agency as the transportation security agency or the immigration and naturalization service and a terrorist organization like al qaeda the governmental agency wants to stop the terrorists but first must infer whether a visa applicant or an airline passenger is a terrorist on the basis of some observable signal the terrorist organization s objective is to get past security to commit murder and mayhem we derive the equilibrium strategy for this signaling model and evaluate specific anti terrorist policies as the creation of the new homeland security agency and increased airport security screening

collective versus unilateral responses to terrorism global terrorism presents collective action issues for targeted nations proactive measures e g preemptive strikes against terrorists create external benefits for all at risk nations in contrast defensive actions deflect attacks to softer targets thereby giving rise to external benefits to protected foreign residents and external costs to venues abroad coordinated antiterrorism measures are particularly difficult to achieve when many nations must participate and nonparticipants can undo the efforts of others thus freezing terrorists assets or abiding by a no negotiation pledge pose difficult collective action problems these same concerns do not plague decisive action against domestic terrorism

endogenous cases and the evolution of the common law i develop a dynamic model of judge made law in which the ideal legal rule is unknown but can be learned in contrast to existing articles the flow of cases heard by the court is affected by the court s prior decisions the model highlights the significance of this feedback in explaining when and why the court will write broader or narrower opinions and the long run properties of common law in equilibrium the law settles endogenously because the incentives to make legally controversial choices disappear as the law evolves settled law exhibits residual uncertainty and ambiguity and potentially implements inefficient outcomes

legal efficiency and consistency abstract we analyze the efficiency and consistency of court decisions under common and civil law as a leading example we study the enforcement of property rights judges are of two types some are conservative and follow the precedent or the statute while others maximize social welfare when courts intervene ex post after the relevant economic choices have been made welfare maximizing courts face a commitment problem such an ex post bias has implications on the relative consistency and efficiency of each legal system surprisingly we find that court decisions are more consistent under common law than under civil law the welfare comparison between the two systems is instead ambiguous however in changing economic environments common law is more likely to dominate civil law because of its greater adaptability

the peer effect in counterterrorist policies existing accounts posit that defensively oriented counterterrorist policies create negative externalities and result in regulatory competition that induces governments to increasingly tighten their policies we argue that rather than causing an unconditional global race to the top spatial dependence in counterterrorist policies is limited to within groups of countries exposed to a similar level of threat from international terrorism countries strongly differ in their propensity to become the target of an international terror attack governments can safely ignore counterterrorist policies enacted by countries outside their peer group but they must pay attention to measures undertaken by their peers we test several predictions derived from our theory in an empirical analysis of counterterrorist regulations in twenty western developed country democracies over the period 2001 to 2008

politics and the suboptimal provision of counterterror i present a model of interactions between voters a government and a terrorist organization the model focuses on a previously unexplored conceptualization of counterterrorism as divided into tactic specific observable and general unobservable tactics when there is divergence between voters and government preferences strategic substitution among different modes of attack by terrorists and agency problems between the voters and government create a situation in which the politically optimal counterterrorism strategy pursued by the government in response to electoral and institutional incentives is quite different from the security maximizing counterterrorism strategy in particular in response to electoral pressure the government allocates resources to observable counterterror in excess of the social optimum this problem is particularly severe when governments put great weight on rent seeking or care less about counterterror than do voters and when terrorists have a large set of tactics from which to choose voters can decrease the magnitude of the agency problem by increasing the benefits of reelection by for example slackening requirements for nonsecurity related public goods i have received valuable comments and advice from bruce bueno de mesquita randy calvert martin cripps james fearon amanda friedenberg robert powell matthew stephenson and barbara walter i thank the weidenbaum center on the economy government and public policy at washington university for financial support

free riding and paid riding in the fight against terrorism overt terrorist acts and the specter of terrorism impose significant costs on the community of civilized nations these costs can be reduced by taking retaliatory action against terrorist organizations and the countries that sponsor them assuming a positive range over which retaliatory cost is less at the marginal than the resulting benefit from reduced terrorism there exists some positive level of retaliation which is efficient from the perspective of the victimized countries an obstacle to achieving the efficient level of retaliation against terrorists results from the fact that much of the benefit from retaliation is general and cannot be captured entirely by the retaliating country a fully efficient policy of retaliation will therefore require a cooperative response from all victimized countries achieving this cooperation however may confront the well known free rider or prisoner s dilemma problem while collectively the targets and potential targets of terrorism are better off retaliating each will likely see its advantage best served by not retaliating in this case it is quite possible that no one will retaliate when the best response is for everyone to retaliate a closer look at the problem of terrorism however suggests that the standard prisoner s dilemma may not be a significant obstacle to retaliation under plausible conditions it will pay one country to retaliate even if other countries choose to free ride indeed given the two options in the standard prisoner s dilemma setting cooperating retaliating or noncooperating nonretaliating it is very likely that all victimized countries will retaliate that no country will take a free ride but this does not mean that the prospects for genuine cooperation in confronting terrorism are good in the case of retaliation against terrorist free riding is only one way a country can increase the net benefit it receives from the public good provided by another it is possible for one country to in effect sell the public good of reduced terrorism that is generated by the retaliation of another country this paidrider possibility has important and obviously adverse implications for the prospects that retaliation will result from a cooperative effort on the part of those countries victimized by terrorists in section i the implication of free riding and paid riding for retaliation against terrorists will be investigated in a two country setting in section ii the circumstances that either encourage or discourage a country from being a paid rider on the retaliation of another country will be considered and some real world examples of paid riding will be discussed

the economics of counterterrorism a survey we provide a review of theoretical and empirical contributions on the economic analysis of terrorism and counterterrorism we argue that simple rational choice models of terrorist behavior in the form of cost benefit models already provide a well founded theoretical framework for the study of terrorism and counterterrorism we also hint at their limitations which relate to the failure of accounting for the dynamics between terrorism and counterterrorism that may produce unintended second order effects as well as for the costs associated with counterterrorism and its international dimension we reevaluate previously proposed counterterrorism strategies accordingly finally in the light of our findings we discuss interesting areas of future research

an evaluation of interpol s cooperative based counterterrorism linkages abstractthis paper evaluates the payback from efforts of the international criminal police organization interpol to coordinate proactive counterterrorism measures by its member countries to arrest terrorists and weaken their ability to conduct operations we use interpol arrest data and data on utilization of interpol resources by member countries to compute counterfactual benefit measurements which when matched with costs yield benefit cost ratios the average of these ratios is approximately 200 over 12 alternative counterfactual scenarios so each dollar of interpol counterterrorism spending returns approximately 200 this paper also puts forward a perspective on benefits derived from interpol s stolen and lost travel document database interpol provides an inexpensive proactive measure against transnational terrorism that unlike military operations does not result in backlash attacks

market socialism a case for rejuvenation in this paper we will outline a feasible economic mechanism of competitive socialism our claim is that competitive markets are necessary to achieve an efficient and vigorous economy but that full scale private ownership is not necessary for the successful operation of competition and markets contrary to popular impression this claim has not yet been disproved by either history or economic theory it is the failure of both the political right and the left to disentangle the concepts of private ownership and the competitive market that has led to the premature obituaries for socialism in the second section we look at the question of the soft budget constraint as an agency problem under market socialism we then propose two variants of a bank centric system of insider monitoring as a viable solution to the agency problem the next section discusses the essential problem of political accountability and the difficulty of credible pre commitment in avoiding the soft budget constraint problem and suggests ways of minimizing this problem in our proposed system we then conclude by addressing some of the other standard objections to a proposal for market socialism

global terrorism deterrence versus pre emption this paper analyses two anti terrorism policies when a targeted nation s people and property are in jeopardy at home and abroad a country s deterrence decision involves both external benefits and costs as the terrorist threat is deflected while its preemption decision typically gives external benefits when the threat is reduced for all potential targets with damages limited to home interests a country will overdeter while for globalized terror a country will underdeter pre emption is usually undersupplied leader follower behaviour is apt to lessen inefficiency for deterrence but worsen inefficiency for pre emption compared with simultaneous choice equilibrium allocations targeted nations can never achieve the proper counterterrorism policy through leadership ce memoire analyse deux politiques anti terrorisme quand la population et la propriete des nations visees sont en danger tant au pays qu a l etranger la decision de dissuasion d un pays entraine des avantages et des couts externes a proportion que la menace terroriste est evitee alors que la decision de preemption produit typiquement des avantages externes quand la menace est reduite pour toutes les cibles potentielles dans le cas de dommages limites aux cibles dans le pays un pays va etre portea sur dissuader alors que dans le cas de terreur globalisee un pays va etre portea sous dissuader la preemption est generalement sous offerte le comportement leader suiveur est susceptible de reduire l inefficacite de la dissuasion mais d empirer l inefficacite de la preemption par rapport a ce qui se passe quand les choix sont simultanes les nations visees ne peuvent jamais en arriver a la politique d anti terrorisme appropriee par la voie du leadership

swords or plowshares a theory of the security of claims to property this paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities the model emphasizes the distinction between offensive weapons which are the instruments of predation and fortifications which provide defense against predation the analysis of this model shows how the equilibrium security of claims to property is determined the analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure we also analyze the complex relation between economic welfare and the security of claims to property we find for example that a relatively poor agent could be better off in an equilibrium with less secure claims to property

terrorist backlash terrorism mitigation and policy delegation abstract this paper presents a three stage proactive game involving terrorists elected policymakers and voters in each of two targeted countries a representative voter chooses an elected policymaker charged with deciding proactive countermeasures to ameliorate a transnational terrorist threat two primary considerations drive the voters strategic choice free riding on the other countries countermeasures and limiting a reprisal terrorist attack the resulting low proactive countermeasures benefit the terrorists whose attacks successfully exploit voters strategic actions this finding stems from a delegation problem where leadership by voters has a detrimental consequence on the well being of targeted countries domestic politics add another layer of concern when addressing a common terrorist threat

the elementary economics of social dilemmas a social dilemma is in essence a prisoners dilemma in a continuous strategy space i discuss a number of social dilemmas that have caught my attention offer an elementary diagrammatic synthesis of them and discuss some of the economic insights that the diagrams capture including incentives for pre commitment finally i model pre commitment via delegation and link results to the literature on the evolution of preferences l economie elementaire des dilemmes sociaux un dilemme social est essentiellement un dilemme du prisonnier dans un espace continu de strategie l auteur discute d un certain nombre de dilemmes sociaux qui ont retenu son attention il en propose une synthese graphique elementaire et discute certaines des suggestions economiques qui decoulent de ces diagrammes comme par exemple les incitations a se pre engager finalement l auteur construit un modele de pre engagement par delegation et relie ses resultats a la litterature sur l evolution des references

historical evolution and benefit cost explanation of periodical fluctuation in coal mine safety supervision an evolutionary game analysis framework abstract the periodical fluctuation phenomenon appears in coal mine and other fields of government safety supervision the paper provides a theoretical explanation by building an evolutionary game model between coal mine industry and governmental supervision institutions moreover the paper provides a numerical example to demonstrate how the initial state and the costs or gains influence the fluctuation amplitude and the equilibrium position we find that the initial state and the payoffs of different strategies are the two main determinants of periodical fluctuation phenomenon the successful experience of coal mine safety supervision in china shows the importance of highly efficient government safety governance in developing countries