A game-theoretical approach for reciprocal security-related prevention investment decisions

Abstract: Every company situated within a chemical cluster faces important security risks from neighbouring companies. Investing in reciprocal security preventive measures is therefore necessary to avoid major accidents. These investments do not, however, provide a direct return on investment for the investor-company and thus plants are hesitative to invest. Moreover, there is likelihood that even if a company has fully invested in reciprocal security prevention, its neighbour has not, and as a result the company can experience a major accident caused by an initial (minor or major) accident that occurred in an adjacent chemical enterprise. In this article we employ a game-theoretic approach to interpret and model behaviour of two neighbouring chemical plants while negotiating and deciding on reciprocal security prevention investments. [Copyright &y& Elsevier]