This paper describes a decision tree analysis to assess the cost-effectiveness of MANPADS (Man-Portable Air Defense Systems) countermeasures. These countermeasures are electronic devices that can be installed on commercial airplanes to detect and deflect surface-to-air missiles (SAMs) fired by terrorists. The model considers a terrorist attempt to shoot down a commercial airplane with a heat-seeking SAM, and it evaluates the decision to install countermeasures, taking into account alternative modes of attack, probabilities of success, and consequences to the economy. All model variables were fully parameterized, using reasonable ranges based on open-source literature. Not surprisingly, the probability of an attack, the consequences of an attack to the economy, and the cost of countermeasures are the most important parameters. Surprisingly, some of the hotly disputed parameters, such as the probability of an airplane surviving a successful hit or the probability of a false alarm, have very little impact on the results. The analysis suggests that MANPADS countermeasures installed on planes can be cost-effective if the probability of such an attack is large (greater than about 0.40 in ten years), the economic losses are large (greater than about $75 billion), and the countermeasures are relatively inexpensive (smaller than about $15 billion). An economic analysis conducted as part of this analysis showed that the economic impacts can be as large as $250 billion, thus making countermeasures a possibly cost-effective option. More research is needed to determine the real costs of MANPADS countermeasures and how terrorists may shift their tactics, once countermeasures are installed.
