Warnings, terrorist threats and resilience: A laboratory experiment

One of the main goals of terrorism is to instill fear in a targeted populace. We investigate how information precision about rare, but highly devastating terrorist attacks influences psychological resilience, which we operationalize as the ability to continue to take optimum risks. First, we develop a mathematical model of a citizen’s resilience in the face of a terrorist threat. We then test the model in a laboratory experiment in which individuals face a choice between lotteries that offer higher payoffs but have a small probability of a large negative loss and a safe option. In the experiment, we vary the nature of warnings about the lotteries to see how vague warnings vs precise information influence optimal risk-taking (resilience). We find that precise information increases subjects’ willingness to take risks. Warnings containing no information do not influence subjects’ willingness to accept risk, but can influence resilience through affecting which risks subjects take.