Interdependent Security: The Case of Identical Agents / Howard Kunreuther, Geoffrey Heal.

Format:

Book

Author/Creator:

Kunreuther, Howard.

Contributor:

National Bureau of Economic Research.

Heal, Geoffrey.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8871.

NBER working paper series no. w8871

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Interdependent Security

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

Do firms have adequate incentives to invest in anti-terrorism mechanisms? This paper develops a framework for addressing this issue when the security choices by one agent affect the risks faced by others. We utilize the airline security problem to illustrate how the incentive by one airline to invest in baggage checking is affected by the decisions made by others. Specifically if an airline believes that others will not invest in security systems it has much less economic incentive to do so on its own. Private sector mechanisms such as insurance and liability will not necessarily lead to an efficient outcome. To induce adoption of security measures one must turn to regulation, taxation or institutional coordinating mechanisms such as industry associations. We compare the airline security example with problems having a similar structure (i.e., computer security and fire protection) as well as those with different structures (i.e., theft protection and vaccinations). The paper concludes with suggestions for future research.

Notes:

Print version record

April 2002.