Cornière, Alexandre de and Taylor, Greg (2021) A Model of Information Security and Competition. TSE Working Paper, n. 21-1285, Toulouse

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Abstract

Cyberattacks are a pervasive threat in the digital economy, with the potential to harm rms and their customers. Larger rms constitute more valuable targets to hackers, thereby creating negative network eects. These can be mitigated by investments in security, which play both a deterrent and a protective role. We study equilibrium investment in information security under imperfect competition in a model where consumers dier in terms of security savviness. We show that the competitive implications of security depend on rms' business models: when rms compete in prices, security intensies competition, which implies that it is always underprovided in equilibrium (unlike in the monopoly case). When rms are advertising-funded, security plays a business-stealing role, and may be overprovided. In terms of policy, we show that both the structure of the optimal liability regime and the ecacy of certication schemes also depend on rms' business model.

Item Type: Monograph (Working Paper)
Language: English
Date: December 2021
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 18 Jan 2022 10:26
Last Modified: 27 May 2024 09:31
OAI Identifier: oai:tse-fr.eu:126391
URI: https://publications.ut-capitole.fr/id/eprint/44179
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