A simple Attacker-Defender interaction is analyzed, in which a single terrorist (denoted T) will potentially attack a single target in the homeland of a government/state (denoted G). This interaction is modeled as a one-shot sequential move game in which G first chooses how heavily to defend the target, after which T chooses whether or not to stage an attack. T's benefit from a successful attack is allowed to be increasing in the amount of resources that G allocates to defense. In the context of terrorism, this has multiple reasonable interpretations, including situations in which: (i) citizens of the target country are terrified to a greater degree when a more heavily fortified target is successfully attacked or (ii) successfully attacking a more heavily fortified target allows the terrorists to recruit more effectively. The amount by which T's benefit from a successful attack exceeds its baseline due to increased defensive efforts by G can be thought of as a terror effect. This specification differentiates terrorism from traditional conflict in an important way. For the specified model, the amount of defensive efforts by G necessary to prevent T from staging an attack is increasing in the magnitude ofthe terror effect. Moreover, if G inaccurately under perceives the magnitude of the terror effect, then G may choose either less than or more than the optimal level of defense, with the realized outcome depending upon model parameters. The results highlight the importance of correctly understanding the payoffs and motives of terrorists in order to be able to optimally allocate defensive resources.