Terrorist Network Infiltration, Asymmetric Information, and Quality Uncertainty

Abstract

From time to time, the press reports the disruption of a terrorist plot by means of government agents infiltrating a terrorist network. Terrorists believe they are dealing with co-conspirators, only to find they have been dealing with government agents. The problem facing the terrorists is an asymmetric information problem that introduces quality uncertainty into the network of terrorist interactions—terrorists cannot be sure that their affiliates or co-conspirators are of high quality or low quality (that is, not co-conspirators at all but government agents). The economic theory of asymmetric information can be used to analyze the limits of the effectiveness of the injection of government agents into terrorist networks. Terrorist network infiltration is likely one of the most effective anti-terrorism security operations. Not only can network infiltration generate the results that capture the attention of the popular press but it can also destroy terrorist networks into which no government agents have actually been injected. Governments and their security agencies are advised to consider the resources allocated toward this type of anti-terrorism security operation.

KEYWORDS:

• Terrorist
• terrorism
• terrorist network
• asymmetric information
• quality uncertainty
• government agents

Notes

1. Information asymmetry is not synonymous with incomplete information. Economic interaction may be characterized by imperfect information on both sides. To highlight discrepancies in the distribution of information among the parties to the interaction requires speaking of asymmetrical incomplete information.

2. Also see Spence (1976) and the textbook treatment by Hillier (1997).

3. Empirical applications of Akerlof's (1970) theoretical work include studies by Chiu and Karni (1998), Genesove (1993), and Gilligan (2004).

4. Economists generally believe that a normal range for the value of the relative risk aversion coefficient is between 1 and 5 (Barro, 2006).

5. This is similar to the credit market problem examined by Hillier (1997).

6. Because the average of the low risk and high risk activities will be less than r*, requiring allocation of sponsorship only to the high risk activities.