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Cyber(in)security and Interoperability in Digital Services

Author

Listed:
  • Stefano Comino

    (University of Udine, Italy)

  • Alessandro Fedele

    (Free University of Bozen-Bolzano, Italy)

  • Fabio Manenti

    (University of Padova, Italy)

Abstract

This paper investigates the interplay between interoperability and the incentives to invest in cybersecurity in digital markets. We develop a two-sided symmetric duopoly model in which cyberattacks create a congestion-like externality, and interoperability amplifies hackers’ incentives to target connected platforms. We show that interoperability affects cybersecurity investment through multiple channels, potentially producing a non-linear relationship: low interoperability promotes risk-mitigation efforts, whereas high interoperability may discourage investment due to a public good effect. We then compare private and social incentives for interoperability, identifying potential sources of misalignment. Finally, we extend the baseline model to account for additional factors shaping the desirability of interoperability, including platforms’ business models, users’ awareness of cyber risk, market expansion effects, and asymmetries in user bases.

Suggested Citation

  • Stefano Comino & Alessandro Fedele & Fabio Manenti, 2025. "Cyber(in)security and Interoperability in Digital Services," BEMPS - Bozen Economics & Management Paper Series BEMPS116, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps116
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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