Network externality and incentive to invest in network security
AbstractBreaches of network security can result in substantial losses for businesses. A game theory-based model is developed to investigate in the short run how network externality influences the optimal strategy of competing online firms producing homogenous services to invest in NS. A firm's self-protect rate and survival probability against NS security incidents differ depending on its related investment decisions. The incentive of a firm to invest in NS is derived, and the impact of the survival probability and the effect of the number of firms investing in NS on a firm's incentive to invest in NS are also analyzed. Policy implications drawn from the study are provided at the end the work.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 36 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/30411
Network externality; Online service firm; Network security investment; Self-protect rate; Survival probability;
Find related papers by JEL classification:
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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