The UN in the Lab

We consider two alternatives to inaction for governments combating terrorism, which we term Deterrence and Prevention. Deterrence – investing in resources that reduce the impact of an attack – generates a negative externality to other governments, making their countries a more attractive objective for terrorists, while Prevention – investing in resources that reduce the ability of the terrorist organization to mount an attack – creates a positive externality by reducing the overall threat of terrorism for all. Due to the structure of this interaction, countries can benefit from coordination of policy choices, and international institutions (such as the UN) can be utilized to facilitate coordination and implement agreements to share the burden of Prevention. Using a nested Prisoner’s Dilemma game we investigate experimentally if subjects can coordinate on a cooperative strategy more frequently when different levels of cost sharing are implemented by exogenously imposed institutions. In all treatments, burden sharing does not alter the Prisoner’s Dilemma structure of the game (deterrence is always the unique Nash strategy). We compare three levels of burden-sharing to a baseline with no burden sharing in a between-subjects design, and find that burden sharing generates a non-linear effect on the choice of the efficient Prevention strategy and overall performance. Only institutions supporting a high level of mandatory burden sharing generate a significant improvement in the use of the Prevention strategy