When risky decisions are not surprising: An application of prospect theory to the Israeli war decision in 2006

Abstract

On 12 July 2006, Hezbollah operatives crossed into Israel and attacked a military patrol, killing three soldiers and kidnapping two more. In retaliation to this incident Israel launched a military operation that resulted in 34 days of fighting between Hezbollah and Israel. The Israeli retaliation has been deemed to be severe and surprising. Furthermore, a public investigation commission established by the Israeli government implicated key decision-makers, and especially Prime Minister Olmert, as guilty of hasty and irresponsible decision-making. This article views this case through the lens of prospect theory, showing how the decision was made at the framing stage, and suggesting that this decision was not hasty but, rather, was consistent with the logic of loss-aversion.