The 'price' of terrorism

Article

Phillips, Peter J.. 2005. "The 'price' of terrorism." Defence and Peace Economics. 16 (6), pp. 403-414. https://doi.org/10.1080/10242690500115931
Article Title

The 'price' of terrorism

ERA Journal ID30484
Article CategoryArticle
Authors
AuthorPhillips, Peter J.
Journal TitleDefence and Peace Economics
Journal Citation16 (6), pp. 403-414
Number of Pages12
Year2005
Place of PublicationUnited Kingdom
ISSN1024-2694
1476-8267
Digital Object Identifier (DOI)https://doi.org/10.1080/10242690500115931
Web Address (URL)https://www.tandfonline.com/doi/full/10.1080/10242690500115931
Abstract

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.

Keywordsterrorism, price of terrorism, resource endowment, contingent claims, political influence
ANZSRC Field of Research 2020350299. Banking, finance and investment not elsewhere classified
440804. Defence studies
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Byline AffiliationsDepartment of Finance and Banking
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