Strategic Entry Deterrence and Terrorism: Theory and Experimental Evidence
Abstract
Using a two stage rent-seeking framework, we present a simple model of strategic entry/terrorism deterrence and test the model using laboratory experiments. Our contest success function highlights the potential for strategic spillovers. The theory illustrates that, relative to a cooperative outcome, negative externalities lead to over-spending on deterrence and positive externalities lead to under-spending on deterrence. Our experimental results are broadly consistent; subjects in the negative externality treatment had higher expenditures. In contrast to theoretical predictions, participation decisions, while primarily driven by the probability of winning a contest, were influenced by a subject's ability to participate in multiple contests.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jan 01, 2009
- Accession Number
- ADA518776
Entities
People
- John Cadigan
- Pamela M. Schmitt