Defending against intentional and non-intentional threats under information asymmetry

点击翻译按钮获取中文摘要

September 11, 2001, and September 6, 2017, will be remembered for a very long time. Though property damage and loss of life occurred on both days, the causes were drastically different. On September 11, a focused and determined group of terrorists executed a vicious attack on the US, whereas, on September 6, the destructive Hurricane Irma that hits Southeastern US was an act of nature. The frequency of terrorist attacks and natural disasters is increasing around the world, and Canada is not naive about these threats that dominate the world's attention. The cumulative effect of these disasters produces a significant personal, material and economic strain on individuals, communities and the fiscal capacity of all levels of governments. Indeed, in the aftermath of (i) the recent deadly terrorist attacks in Canada (such as those on October 2014, in which Canada suffered two terrorist attacks by Islamist extremists); (ii) the Canadian military intervention beyond Canada's borders (e.g., those against the Islamic State of Iraq and the Levant, and those against Daesh, Jabhat al-Nusra and Hizballah); and (iii) recent natural disasters in Canada (such as wildfire in Fort McMurray, Alberta in May 2016, and flood in Southern Manitoba in June 2014), it becomes a challenge for the Canadian government finding how to balance protection from intentional threats and natural disasters subject to limited defensive budget. Addressing these concerns, this research aims to understand the impact of existing/emerging intentional threats and natural disasters on the government's defense plan. Through the following two interrelated modules, we plan to develop a theoretical framework that helps the government optimally distribute its limited budget against the threats. First, based on advanced operations research techniques, specifically those of game theory under information asymmetry, we plan to develop models that enable the government to prioritize the threats from both intentional sources (a strategic player) and natural disasters (a player who plays with the chance). We then use advanced techniques in optimization and mathematical modeling to solve for the optimal distribution of defensive budget against the threats. Given the fact that government has a limited budget and may not be able to mitigate all the threats, in the second module of the project, we use the theory of incentives and mechanism design to identify the opportunities where a public-private partnership in security can be formed. In this module, we plan to develop a theoretical framework that helps the government analyze different public incentives to attract private sector investment in security. In particular, we want to study the effectiveness of direct incentives (such as subsidies, security grants, or tax credits) against indirect incentives (such as liability protection, training, bundled insurance) in fostering the private sector's investment in the security programs.