Suchergebnisse

Economists have regarded behavioral economics as contributing evidence violating accepted theories. This paper contends that a second, perhaps more important, contribution is the new theory that has arisen to address these challenges. To illustrate, the paper examines how a single observed fact, cooperation in the finitely-repeated prisoners' dilemma, has led to extensions of the folk theorem as well as to new concepts including sequential equilibrium, quantal response equilibrium, psychological game theory, and pregame and post-game perfection. Thus, the observed departures from previously-standard theories have led to not only new understandings of behavior, but also to additions to the economics toolkit.

We analyze decisions made by a group of terrorists and a target government in a zero‐sum game in which the terrorists minimize, and the government maximizes, the expected utility of the median voter in the target country. The terrorists' strategy balances the probability and the severity of the attack while the government chooses the level of investment reducing the probability and/or mitigating the severity of attacks. We find that risk aversion affects the strategies of both the government and the terrorists, leading to more severe, less frequent attacks but not necessarily more counterterrorism expenditures.