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Networks, hackers, and nonprotected consumers

Author

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  • Bartholomae, Florian W.

Abstract

In this paper a network model is developed in which three players sequentially choose their strategies. In the first stage, a profit-maximizing network firm chooses the price and thus the size of the network. In the second stage the consumers decide whether to join in the network or not. In the last stage a hacker has the opportunity to hack the network and cause damage to the consumer. The success of hacking is based on the protection of the customers. Whereas in the first part of the paper this is given exogenously it is endogenized later on. In an extension, the utility of the hacker as well as the consumers includes psychological costs, thus allowing some further insights. Finally, policy implications are given implying better international cooperation of the law enforcement authorities.

Suggested Citation

  • Bartholomae, Florian W., 2013. "Networks, hackers, and nonprotected consumers," Working Papers in Economics 2013,3, Bundeswehr University Munich, Economic Research Group.
    • Handle: RePEc:zbw:ubwwpe:20133
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    Cited by:

    1. Beate Sauer, 2015. "Central Bank Behaviour Concerning the Level of Bitcoin Regulation as a Policy Variable," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 1(4), pages 273-286, April.

    More about this item

    Keywords

    hacking; network size; cloud computing; nonprotected consumers;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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