Terrorists’ Attack Method Choices in Equilibrium

What is it about?

This paper explains the equilibrium that would be observed if all terrorist groups chose their attack methods in the manner described in my 2009 paper, "Applying Modern Portfolio Theory to the Analysis of Terrorist Choice." Equilibrium is an analytical construct that can be usefully applied to simplify a problem or to visualise a problem differently or under particular circumstances. It is the case, empirically, that the attack methods from which terrorists choose are characterised by a positive trade-off between the expected number of inflicted fatalities and the risk or uncertainty associated with that expectation. Likewise, there is a positive 'market price for risk' in this context. This paper represents an attempt to formalise these ideas and in doing so develop a different way of looking at the terrorism context. The idea that equilibrium can be illustrated by a straight-line in two-dimensional space is a powerful one that can generate new insights regarding terrorism.

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Why is it important?

Simply, this is a different way of looking at the terrorism context. At the very least, this perspective highlights the generally positive relationship between risk (variability of outcomes) and the number of fatalities expected to be inflicted by the deployment of a particular attack method or combination of attack methods. We could imagine that the positive risk-reward relationship and the commensurate market price of risk reflects the general state of affairs within the terrorism context. We can also imagine that this state of affairs would settle into an equilibrium if it was not continuously disturbed. This equilibrium may be visualised as a straight line in expected fatalities-standard deviation space. Adjustment to equilibrium may be visualised as the continuous movement of the expected outcomes and risk attending particular attack methods and combinations above and below the equilibrium line. The innovation of new law enforcement techniques or new terrorist attacks may be visualised as a shattering and re-piecing together of the equilibrium trade-off between risk and reward.

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