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Rational Theory of Information Security Battle: Economic Analysis of Preemptive Behavior

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  • Goto, Makoto
  • Tatsumi, Ken-ichi

Abstract

We develop a model of a zero-sum information security game by introducing a reward function (called P-function) for cyber attackers into the models of Gordon and Leob (2002) and Tatsumi and Goto (2010). Then the preemptive behavior of cyber attackers or defenders is analyzed. The derivation of the optimal behavior is based on a real options theory and the properties are numerically calculated. Through our numerical analysis cyber attackers are turned out to be rational in the sense that they are very sensitive and quickly respond to both the monetary gain that they will obtain and the vulnerability of defenders. We further observe among others that, in many cases, defenders can optimally preempt. However, this is because attackers have no incentive to attack targets with a small monetary gain.

Suggested Citation

  • Goto, Makoto & Tatsumi, Ken-ichi, 2016. "Rational Theory of Information Security Battle: Economic Analysis of Preemptive Behavior," Discussion paper series. A 303, Graduate School of Economics and Business Administration, Hokkaido University.
    • Handle: RePEc:hok:dpaper:303
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    File URL: http://hdl.handle.net/2115/62344
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    References listed on IDEAS

    as
    1. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    2. Makoto Goto & Ken-ichi Tatsumi, 2012. "The Theory of Optimal Investment in Information Security and Adjustment Costs: An Impulse Control Approach," World Scientific Book Chapters, in: Akihiko Takahashi & Yukio Muromachi & Hidetaka Nakaoka (ed.), Recent Advances In Financial Engineering 2011, chapter 5, pages 73-96, World Scientific Publishing Co. Pte. Ltd..
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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