This chapter organizes the conjectures from a rationalist literature on terrorist organizations, analyzing the strategic issues that they face and the consequences of their actions. From this perspective, terrorism is seen as one of a set of rebel tactics that is chosen in response to changes in five factors: funding, popular support, competition against other rebel groups, the type of regime against which they are fighting, and counterinsurgency tactics. However, once groups adopt terrorist tactics over other, more traditional, tactics of insurgency, terrorism becomes self-perpetuating. This is especially true when the use of terrorist tactics coincides with a shift into underground modes of organization.

The value added by this literature, in conjunction with some standard econometric analyses, is that it helps to identify the relevant actors, to reckon their utilities and payoffs, and to highlight different factors that affect when/where/and against whom terrorists strike. However, because the studies under review are not, by and large, written as part of a coherent, self-aware literature, a summary of the conjectures offered in the literature will not lead to an internally consistent body of testable hypotheses. Instead, we use the literature as a jumping off point to suggest a series of broad hypotheses that should serve as a foundation for future theoretical analysis and statistical testing. The emphasis here will be on developing hypotheses to understand why, where, and when civilians are likely to become victims in rebellions.