An experimental analysis of risk effects in attacker‐defender games

Abstract

This paper reports results of two‐person games in which a defender chooses between high and low alert states, and an attacker chooses whether to attack or wait. Low alerts and attacks are risky because successful attacks are costly for the defender and failed attacks are costly for the attacker. The Nash equilibrium, even allowing for risk aversion, has the stark property that a reduction in the attacker's cost has no effect on the attack probability. In contrast, high attack costs are associated with lower attack rates in a laboratory experiment conducted with monetary payoffs. The empirical analysis is focused on explaining strategic behavior as it is affected by risk aversion and behavioral “noise” in strategic best responses. A model incorporating both of these features outperforms others. Generalized comparative static results for changes in attack costs and risk aversion are proved in the context of a nonparametric quantal response equilibrium.