The Economic Incentives for Sharing Security Information
AbstractGiven that Information Technology (IT) security has emerged as an important issue in the last few years, the subject of security information sharing among firms, as a tool to minimize security breaches, has gained the interest of practitioners and academics. To promote the disclosure and sharing of cyber-security information among firms, the US federal government has encouraged the establishment of many industry based Information Sharing & Analysis Centers (ISACs) under Presidential Decision Directive 63. Sharing security vulnerabilities and technological solutions related to methods for preventing, detecting and correcting security breaches, is the fundamental goal of the ISACs. However, there are a number of interesting economic issues that will affect the achievement of this goal. Using game theory, we develop an analytical framework to investigate the competitive implications of sharing security information and investments in security technologies. We find that security technology investments and security information sharing act as ``strategic complements'' in equilibrium. Our results suggest that information sharing is more valuable when product substitutability is higher, implying that such sharing alliances yield greater benefits in more competitive industries. We also highlight that the benefits from such information sharing alliances increase with the size of the firm. We compare the levels of information sharing and technology investments obtained when firms behave independently (Bertrand-Nash) to those selected by an ISAC which maximizes social welfare or joint industry profits. Our results help us predict the consequences of establishing organizations such as ISACs, CERT or InfraGard by the federal government.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0503004.
Length: 41 pages
Date of creation: 13 Mar 2005
Date of revision:
Note: Type of Document - pdf; pages: 41
Contact details of provider:
Web page: http://184.108.40.206
Technology Investment; Information Sharing; Security Breaches; Externality Benefit; Spillover Effect; Social Welfare;
Find related papers by JEL classification:
- L - Industrial Organization
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roger B. Myerson & Mark A. Satterthwaite, 1981.
"Efficient Mechanisms for Bilateral Trading,"
469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Milgrom, Paul, 1994. "Comparing Optima: Do Simplifying Assumptions Affect Conclusions?," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 607-15, June.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
- Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
- d'Aspremont, Claude & Jacquemin, Alexis, 1988.
"Cooperative and Noncooperative R&D in Duopoly with Spillovers,"
American Economic Review,
American Economic Association, vol. 78(5), pages 1133-37, December.
- d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
- Gordon, Lawrence A. & Loeb, Martin P. & Lucyshyn, William, 2003. "Sharing information on computer systems security: An economic analysis," Journal of Accounting and Public Policy, Elsevier, vol. 22(6), pages 461-485.
- Theodore Groves & Martin Loeb, 1974.
"Incentives and Public Inputs,"
29, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Roger B. Myerson, 1977.
"Incentive Compatability and the Bargaining Problem,"
284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
- Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- How can we co-operate to tackle phishing?
by Tyler Moore in Light Blue Touchpaper on 2008-10-27 12:47:06
- Alfredo Garcia & Barry Horowitz, 2007. "The potential for underinvestment in internet security: implications for regulatory policy," Journal of Regulatory Economics, Springer, vol. 31(1), pages 37-55, February.
- Fabio BISOGNI & Simona CAVALLINI & Sara DI TROCCHIO, 2011. "Cybersecurity at European Level: The Role of Information Availability," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(81), pages 105-124, 1st quart.
- Nizovtsev, Dmitri & Thursby, Marie, 2007. "To disclose or not? An analysis of software user behavior," Information Economics and Policy, Elsevier, vol. 19(1), pages 43-64, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.