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Attack-prevention and damage-control investments in cybersecurity

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  • Lam, Wing Man Wynne

Abstract

This paper examines investments in cybersecurity made by users and software providers with a focus on the latter's concerning attack prevention and damage control. I show that full liability, whereby the provider is liable for all damage, is inefficient, owing namely to underinvestment in attack prevention and overinvestment in damage control. On the other hand, the joint use of an optimal standard, which establishes a minimum compliance framework, and partial liability can restore efficiency. Implications for cybersecurity regulation and software versioning are discussed.

Suggested Citation

  • Lam, Wing Man Wynne, 2016. "Attack-prevention and damage-control investments in cybersecurity," Information Economics and Policy, Elsevier, vol. 37(C), pages 42-51.
    • Handle: RePEc:eee:iepoli:v:37:y:2016:i:c:p:42-51
    DOI: 10.1016/j.infoecopol.2016.10.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Cybersecurity; Investment; Standard; Liability; Bilateral care;
    All these keywords.

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services

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