This article focuses on the strategic interaction between a terrorist group and a government as both vie for grassroots support. When terrorists and the government act contemporaneously, the equilibrium outcome depends on the effectiveness of the government’s countermeasures and the ability of the government to curb popular support of the terrorists through public spending. In two alternative scenarios, the authors establish that leadership may improve both adversaries’ well-being while reducing terrorism. The leader changes in the two cases, with the weaker player going first to the advantage of both players. State sponsorship and franchising of terrorists augment violence as both adversaries expend more effort. Sponsors can offset some strategic limits to violence that competition for supporters offers.
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