ABSTRACT
Terrorists form an identity that they do not want to lose and this makes their choices rigid and insensitive to changing conditions. In economics, this rigidity is explained as a manifestation of the endowment effect, which in turn is explained by loss aversion. The endowment effect, loss aversion and identity combine to explain patterns of engagement in terrorism, attack method choices and a general reluctance to give up any concessions at all during negotiation.
