Dynamic Inconsistency in Counterterrorism

Repeated interaction between a terrorist group and a target government is analyzed in a game-theoretic model. The analysis identifies a dynamic inconsistency problem, which forces the government to under-invest in defensive measures while over-investing in offensive measures. Policy implications are discussed in light of recent US counterterrorism experience. It is shown that governments may resolve the problem by delegating the authority over defensive measures to an independent agency.