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Individual security, contagion, and network design

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Listed:
  • Cerdeiro, Diego A.
  • Dziubiński, Marcin
  • Goyal, Sanjeev

Abstract

Individuals derive benefits from their connections, but these may expose them to external threats. Agents therefore invest in security to protect themselves. What are the network architectures that maximize collective welfare? We propose a model to explore the tension between connectivity and exposure to an external threat when security choices are decentralized. We find that both over-investment and under-investment in security are possible, and that optimal network architectures depend on the prevailing source of inefficiencies. Social welfare may be maximized in sparse connected networks when under-investment pressures are present, and fragmented networks when over-investment pressures prevail.

Suggested Citation

  • Cerdeiro, Diego A. & Dziubiński, Marcin & Goyal, Sanjeev, 2017. "Individual security, contagion, and network design," Journal of Economic Theory, Elsevier, vol. 170(C), pages 182-226.
    • Handle: RePEc:eee:jetheo:v:170:y:2017:i:c:p:182-226
    DOI: 10.1016/j.jet.2017.05.006
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    References listed on IDEAS

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    1. Acemoglu, Daron & Malekian, Azarakhsh & Ozdaglar, Asu, 2016. "Network security and contagion," Journal of Economic Theory, Elsevier, vol. 166(C), pages 536-585.
    2. Sanjeev Goyal & Adrien Vigier, 2014. "Attack, Defence, and Contagion in Networks," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1518-1542.
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    Cited by:

    1. Cerdeiro, Diego A., 2017. "Contagion exposure and protection technology," Games and Economic Behavior, Elsevier, vol. 105(C), pages 230-254.
    2. Bloch, Francis & Dutta, Bhaskar & Dziubiński, Marcin, 2020. "A game of hide and seek in networks," Journal of Economic Theory, Elsevier, vol. 190(C).
    3. Bloch, Francis & Chatterjee, Kalyan & Dutta, Bhaskar, 2023. "Attack and interception in networks," Theoretical Economics, Econometric Society, vol. 18(4), November.
    4. Pinar Yildirim & Yanhao Wei & Christophe Bulte & Joy Lu, 2020. "Social network design for inducing effort," Quantitative Marketing and Economics (QME), Springer, vol. 18(4), pages 381-417, December.
    5. Britta Hoyer & Kris De Jaegher, 2023. "Network disruption and the common-enemy effect," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(1), pages 117-155, March.
    6. Mehmet Bac, 2023. "Transnational crimes: how nations should cooperate and why they don't," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(4), pages 860-899, October.
    7. Alessandro Fedele & Cristian Roner, 2022. "Dangerous games: A literature review on cybersecurity investments," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 157-187, February.

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    Keywords

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    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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