eprintid: 16553
rev_number: 8
eprint_status: archive
userid: 1482
importid: 105
dir: disk0/00/01/65/53
datestamp: 2015-03-16 14:49:43
lastmod: 2021-04-02 15:49:25
status_changed: 2015-03-16 14:49:43
type: monograph
metadata_visibility: show
creators_name: Lam, Wing Man Wynne
creators_idrefppn: 182193195
title: Ex Ante and Ex Post Investments in Cybersecurity
ispublished: pub
subjects: subjects_ECO
abstract: This paper develops a theory of sequential investments in cybersecurity in which the software vendor can invest ex ante and ex post. The regulator can use safety standards and liability rules as means of increasing security. A standard is a minimum level of safety, and a liability rule states the amount of damage each party is liable for. I show that the joint use of an optimal standard and a full liability rule leads to underinvestment ex ante and overinvestment ex post because the software vendor does not suffer the full costs of the society in case of security failure. Instead, switching to a partial liability rule can correct the inefficiencies. This suggests that to improve security, the regulator should encourage not only the firms, but also the enterprises to invest in security. I also discuss the effect of network externality and explain why firms engage in "vaporware".
date: 2014-08
date_type: published
publisher: TSE Working Paper
official_url: http://tse-fr.eu/pub/28400
faculty: tse
divisions: tse
keywords: cybersecurity
keywords: sequential investment
keywords: standards
keywords: liability
language: en
has_fulltext: TRUE
subjectsJEL: JEL_L1
subjectsJEL: JEL_L8
view_date_year: 2014
full_text_status: public
monograph_type: working_paper
series: TSE Working Paper
volume: 14-519
book_title: TSE Working Paper
oai_identifier: oai:tse-fr.eu:28400
harvester_local_overwrite: oai_set
harvester_local_overwrite: faculty
harvester_local_overwrite: site
harvester_local_overwrite: creators_idrefppn
oai_lastmod: 2015-07-31T18:00:02Z
oai_set: tse
oai_set: ut1c
site: ut1
citation:   Lam, Wing Man Wynne <https://www.idref.fr/182193195>  (2014) Ex Ante and Ex Post Investments in Cybersecurity.  TSE Working Paper, n. 14-519     
document_url: https://publications.ut-capitole.fr/id/eprint/16553/1/wp_tse_519.pdf