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Security investment and information sharing in the market of complementary firms: impact of complementarity degree and industry size

Author

Listed:
  • Xinbao Liu

    (Hefei University of Technology
    Key Laboratory of Process Optimization and Intelligent Decision-Making of Ministry of Education)

  • Xiaofei Qian

    (Hefei University of Technology
    University of Florida)

  • Jun Pei

    (Hefei University of Technology
    University of Florida)

  • Panos M. Pardalos

    (University of Florida)

Abstract

We study a differential game of information security investment and information sharing in a market consisting of n complementary firms. Two game approaches, the non-cooperative game and the totally cooperative game, are employed to investigate the steady state strategy of each firm. Under certain conditions, a unique steady state can be obtained for both games. We find that the steady state security investment and information sharing level are not always less in the non-cooperative game than that in the totally cooperative game. In addition, some theoretical analyses are made on the impacts of the complementarity degree and industry size on firms’ steady state strategies for both games. Finally, some numerical experiments are conducted to give some insights related to the instantaneous profit in the steady state. It can be found that a firm will obtain more instantaneous profit in the steady state of the totally cooperative game than that of the non-cooperative game, which emphasizes the importance of coordinating strategies. The effects of the complementarity degree and industry size on the instantaneous profits in the steady state are also obtained through the numerical experiment results.

Suggested Citation

  • Xinbao Liu & Xiaofei Qian & Jun Pei & Panos M. Pardalos, 2018. "Security investment and information sharing in the market of complementary firms: impact of complementarity degree and industry size," Journal of Global Optimization, Springer, vol. 70(2), pages 413-436, February.
    • Handle: RePEc:spr:jglopt:v:70:y:2018:i:2:d:10.1007_s10898-017-0585-y
    DOI: 10.1007/s10898-017-0585-y
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    References listed on IDEAS

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    2. Alessandro Fedele & Cristian Roner, 2022. "Dangerous games: A literature review on cybersecurity investments," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 157-187, February.
    3. Lu Xu & Yanhui Li & Qi Yao, 2022. "Information security investment and purchase decision for personalized products," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2619-2635, September.
    4. Xiaofei Qian & Jun Pei & Xinbao Liu & Mi Zhou & Panos M. Pardalos, 2019. "Information security decisions for two firms in a market with different types of customers," Journal of Combinatorial Optimization, Springer, vol. 38(4), pages 1263-1285, November.
    5. Lu Xu & Yanhui Li & Jing Fu, 2019. "Cybersecurity Investment Allocation for a Multi-Branch Firm: Modeling and Optimization," Mathematics, MDPI, vol. 7(7), pages 1-20, July.

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