Modeling arson - An exercise in qualitative model building

A detailed example is given of the role of von Neumann and Morgenstern's 1944 'expected utility theorem' (in the theory of games and economic behavior) in qualitative model building. Specifically, an arsonist's decision as to the amount of time to allocate to arson and related activities is modeled, and the responsiveness of this time allocation to changes in various policy parameters is examined. Both the activity modeled and the method of presentation are intended to provide an introduction to the scope and power of the expected utility theorem in modeling situations of 'choice under uncertainty'. The robustness of such a model is shown to vary inversely with the number of preference restrictions used in the analysis. The fewer the restrictions, the wider is the class of agents to which the model is applicable, and accordingly more confidence is put in the derived results. A methodological discussion on modeling human behavior is included.