Optimal Allocation of Resources in Airport Security: Profiling vs. Screening

This model examines the role of intelligence gathering and screening in providing airport security. We analyze this problem using a game between the government and a terrorist. By investing in intelligence gathering, the government can improve the precision of its information. In contrast, screening can be used to search a passenger and thereby deter terrorist attacks. We determine the optimal allocation of resources between these two strategies wherein we model the role of in-telligence using the concept of supermodular precision. One striking result is that under certain circumstances, an increase in the investment in intelligence can induce a more devious terrorist to attack with a higher probability. We also find that when there is a cost-reducing innovation in the screening technology, then the optimal investment in intelligence gathering can go either way. How-ever, such an innovation unambiguously improves social welfare. Another interesting implication is that a developed economy would value intelligence inputs more than a developing economy. We als