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Market must be defended: The role of counter-espionage policy in protecting domestic market welfare

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  • Barrachina, Alex
  • Forner-Carreras, Teresa

Abstract

Governments of advanced economies are extremely concerned about the illicit acquisition of information on critical technologies employed by their industries, and countering this economic espionage is quickly becoming one of their top priorities. The present paper advances the theoretical analysis of the interaction between economic espionage and counter-espionage, and presents a first approximation to an inquiry into the rationale for the influence of market competition in its dynamics. The proposed model assumes a country with a one-market economy open to international trade whose product is supplied by domestic firms. Moreover, successful economic espionage implying market entry of foreign firms would harm domestic welfare. Considering counter-espionage policy as entry barrier and sufficient efficiency in espionage and counter-espionage efforts, the analysis of the benchmark case characterized by no foreign consumer and one foreign firm suggests that demand characteristics play an important role in the complex influence of competition in espionage. Irrespective of this, optimal counter-espionage effort is always positive although negatively affected by competition.

Suggested Citation

  • Barrachina, Alex & Forner-Carreras, Teresa, 2022. "Market must be defended: The role of counter-espionage policy in protecting domestic market welfare," Information Economics and Policy, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:iepoli:v:58:y:2022:i:c:s0167624522000014
    DOI: 10.1016/j.infoecopol.2022.100964
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    More about this item

    Keywords

    Secret technology; Economic espionage; Counter-espionage policy; Market entry barrier; Market welfare;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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