National Responses to Transnational Terrorism: Intelligence and Counterterrorism Provision

Intelligence about transnational terrorism is generally gathered by national agencies. I set up and analyze a game-theoretic model to study the implications of national intelligence gathering for the provision of domestic (defensive) counterterrorism when two countries are facing a common transnational terrorist threat. It is shown that, relative to a benchmark case where all intelligence is known by both countries, national intelligence gathering often leads to increased inefficiencies in counterterrorism provision. By extending the main model with a communication stage, I also explore whether the differences in information that may follow from national intelligence gathering will be overcome by intelligence sharing. If verifiable sharing is a viable option for each country, then full credible intelligence sharing can happen in equilibrium. On the other hand, if only cheap talk communication is possible, then it cannot.