Too much of a good thing? The proactive response dilemma

In a two-player proactive response game the level of proactive activity and the choice of terrorist target is endogenized. The targeted government first chooses its measures to weaken the terrorists, and the terrorists then choose the type of event-normal or spectacular. Unlike previous analyses, proactive policy has a downside by increasing grievances and, consequently, terrorist recruitment. If the government responds too harshly, its actions can empower the terrorists by providing a larger constituency. Aggressive antiterrorist actions, encouraged by a high perceived loss from terrorism and low marginal proactive costs, may result in spectacular events with dire consequences. If spectaculars are transferred abroad to soft targets, then proactive operations may be excessive from a global viewpoint as external costs are ignored. The analysis explains why some target nations engage in a modest level of offense but a prime target chooses a large level.