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The Economics of Online Crime

Author

Listed:
  • Tyler Moore
  • Richard Clayton
  • Ross Anderson

Abstract

This paper will focus on online crime, which has taken off as a serious industry since about 2004. Until then, much of the online nuisance came from amateur hackers who defaced websites and wrote malicious software in pursuit of bragging rights. But now criminal networks have emerged -- online black markets in which the bad guys trade with each other, with criminals taking on specialized roles. Just as in Adam Smith's pin factory, specialization has led to impressive productivity gains, even though the subject is now bank card PINs rather than metal ones. Someone who can collect bank card and PIN data, electronic banking passwords, and the information needed to apply for credit in someone else's name can sell these data online to anonymous brokers. The brokers in turn sell the credentials to specialist cashiers who steal and then launder the money. We will examine the data on online crime; discuss the collective-action aspects of the problem; demonstrate how agile attackers shift across national borders as earlier targets wise up to their tactics; describe ways to improve law-enforcement coordination; and we explore how defenders' incentives affect the outcomes.

Suggested Citation

  • Tyler Moore & Richard Clayton & Ross Anderson, 2009. "The Economics of Online Crime," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 3-20, Summer.
  • Handle: RePEc:aea:jecper:v:23:y:2009:i:3:p:3-20 Note: DOI: 10.1257/jep.23.3.3
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.23.3.3
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    References listed on IDEAS

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    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    2. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
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    Citations

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    Cited by:

    1. repec:wsi:igtrxx:v:19:y:2017:i:02:n:s0219198917500104 is not listed on IDEAS
    2. Sanjeev Goyal & Adrien Vigier, 2014. "Attack, Defence, and Contagion in Networks," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1518-1542.
    3. Tyler MOORE & Richard CLAYTON, 2011. "The Impact of Public Information on Phishing Attack and Defense," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(81), pages 45-68, 1st quart.
    4. Gauguier, Jean-Jacques, 2009. "L’industrialisation de l’Open Source," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/4388 edited by Toledano, Joëlle, March.
    5. Huub Meijers, 2014. "Does the internet generate economic growth, international trade, or both?," International Economics and Economic Policy, Springer, pages 137-163.
    6. Dan Kovenock & Brian Roberson & Roman M. Sheremeta, 2010. "The Attack and Defense of Weakest-Link Networks," Purdue University Economics Working Papers 1256, Purdue University, Department of Economics.
    7. Schmidt, Andreas, 2012. "At the boundaries of peer production: The organization of Internet security production in the cases of Estonia 2007 and Conficker," Telecommunications Policy, Elsevier, pages 451-461.
    8. Lam, Wing Man Wynne, 2014. "Ex Ante and Ex Post Investments in Cybersecurity," TSE Working Papers 14-519, Toulouse School of Economics (TSE).
    9. Reurink, Arjan, 2016. "Financial fraud: A literature review," MPIfG Discussion Paper 16/5, Max Planck Institute for the Study of Societies.
    10. Kox, Henk L.M., 2013. "Cybersecurity in the perspective of Internet traffic growth," MPRA Paper 47883, University Library of Munich, Germany.
    11. repec:eee:soceps:v:58:y:2017:i:c:p:3-12 is not listed on IDEAS
    12. Lam, Wing Man Wynne, 2016. "Attack-prevention and damage-control investments in cybersecurity," Information Economics and Policy, Elsevier, vol. 37(C), pages 42-51.
    13. Seo-Young Cho, 2016. "A crime 2.0 - cybercrime, e-talent, and institutions," MAGKS Papers on Economics 201608, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    14. repec:gam:jgames:v:8:y:2017:i:2:p:23-:d:99623 is not listed on IDEAS
    15. Lam, W., 2015. "Attack-Deterring and Damage-Control Investments in Cybersecurity," CORE Discussion Papers 2015023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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