IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v43y2022i7p2748-2758.html
   My bibliography  Save this article

An economic analysis of information security outsourcing with competitive firms

Author

Listed:
  • Xing Gao
  • Siyu Gong

Abstract

Nowadays, firms may outsource information security operation to a managed security service provider (MSSP). Constructing a game‐theoretic model, this paper examines the strategic interaction between a MSSP and a strategic hacker in the presence of two competitive firms. We find that the MSSP's equilibrium benefit increases with the firms' loss due to user inconvenience and competition intensity when they remain high. It shows that technology similarity may benefit or harm the MSSP, dependent on its investment efficiency. Interestingly, we reveal that the hacker's benefit first decreases and then increases with technology similarity when its learning ability remains moderate.

Suggested Citation

  • Xing Gao & Siyu Gong, 2022. "An economic analysis of information security outsourcing with competitive firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2748-2758, October.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:2748-2758
    DOI: 10.1002/mde.3560
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3560
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3560?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Xing Gao & Weijun Zhong & Shue Mei, 2013. "Information Security Investment When Hackers Disseminate Knowledge," Decision Analysis, INFORMS, vol. 10(4), pages 352-368, December.
    2. Yong Wu & Gengzhong Feng & Richard Y. K. Fung, 2018. "Comparison of information security decisions under different security and business environments," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 69(5), pages 747-761, May.
    3. Kai-Lung Hui & Ping Fan Ke & Yuxi Yao & Wei T. Yue, 2019. "Bilateral Liability-Based Contracts in Information Security Outsourcing," Information Systems Research, INFORMS, vol. 30(2), pages 411-429, June.
    4. Xiaotong Li & Qianyao Xue, 2021. "An economic analysis of information security investment decision making for substitutable enterprises," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1306-1316, July.
    5. Anna Nagurney & Patrizia Daniele & Shivani Shukla, 2017. "A supply chain network game theory model of cybersecurity investments with nonlinear budget constraints," Annals of Operations Research, Springer, vol. 248(1), pages 405-427, January.
    6. Xing Gao & Weijun Zhong, 2016. "A differential game approach to security investment and information sharing in a competitive environment," IISE Transactions, Taylor & Francis Journals, vol. 48(6), pages 511-526, June.
    7. Chul Ho Lee & Xianjun Geng & Srinivasan Raghunathan, 2013. "Contracting Information Security in the Presence of Double Moral Hazard," Information Systems Research, INFORMS, vol. 24(2), pages 295-311, June.
    8. Chenglong Zhang & Nan Feng & Jianjian Chen & Dahui Li & Minqiang Li, 2021. "Outsourcing Strategies for Information Security: Correlated Losses and Security Externalities," Information Systems Frontiers, Springer, vol. 23(3), pages 773-790, June.
    9. Yong Wu & Junlin Duan & Tao Dai & Dong Cheng, 2020. "Managing Security Outsourcing in the Presence of Strategic Hackers," Decision Analysis, INFORMS, vol. 17(3), pages 235-259, September.
    10. Esther Gal-Or & Anindya Ghose, 2005. "The Economic Incentives for Sharing Security Information," Information Systems Research, INFORMS, vol. 16(2), pages 186-208, June.
    11. Xiaofei Qian & Xinbao Liu & Jun Pei & Panos M. Pardalos, 2018. "A new game of information sharing and security investment between two allied firms," International Journal of Production Research, Taylor & Francis Journals, vol. 56(12), pages 4069-4086, June.
    12. Huseyin Cavusoglu & Srinivasan Raghunathan & Hasan Cavusoglu, 2009. "Configuration of and Interaction Between Information Security Technologies: The Case of Firewalls and Intrusion Detection Systems," Information Systems Research, INFORMS, vol. 20(2), pages 198-217, June.
    13. Xing Gao & Weijun Zhong, 2015. "Information security investment for competitive firms with hacker behavior and security requirements," Annals of Operations Research, Springer, vol. 235(1), pages 277-300, December.
    14. Xing Gao & Weijun Zhong & Shue Mei, 2015. "Security investment and information sharing under an alternative security breach probability function," Information Systems Frontiers, Springer, vol. 17(2), pages 423-438, April.
    15. Lawrence A. Gordon & Martin P. Loeb, 2006. "Economic aspects of information security: An emerging field of research," Information Systems Frontiers, Springer, vol. 8(5), pages 335-337, December.
    16. Xiaofei Qian & Xinbao Liu & Jun Pei & Panos M. Pardalos & Lin Liu, 2017. "A game-theoretic analysis of information security investment for multiple firms in a network," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1290-1305, October.
    17. Asunur Cezar & Huseyin Cavusoglu & Srinivasan Raghunathan, 2017. "Sourcing Information Security Operations: The Role of Risk Interdependency and Competitive Externality in Outsourcing Decisions," Production and Operations Management, Production and Operations Management Society, vol. 26(5), pages 860-879, May.
    18. Hausken, Kjell, 2007. "Information sharing among firms and cyber attacks," Journal of Accounting and Public Policy, Elsevier, vol. 26(6), pages 639-688.
    19. Asunur Cezar & Huseyin Cavusoglu & Srinivasan Raghunathan, 2014. "Outsourcing Information Security: Contracting Issues and Security Implications," Management Science, INFORMS, vol. 60(3), pages 638-657, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yong Wu & Junlin Duan & Tao Dai & Dong Cheng, 2020. "Managing Security Outsourcing in the Presence of Strategic Hackers," Decision Analysis, INFORMS, vol. 17(3), pages 235-259, September.
    2. Yong Wu & Mengyao Xu & Dong Cheng & Tao Dai, 2022. "Information Security Strategies for Information-Sharing Firms Considering a Strategic Hacker," Decision Analysis, INFORMS, vol. 19(2), pages 99-122, June.
    3. Xing Gao & Weijun Zhong, 2016. "A differential game approach to security investment and information sharing in a competitive environment," IISE Transactions, Taylor & Francis Journals, vol. 48(6), pages 511-526, June.
    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. Xiaotong Li, 2022. "An evolutionary game‐theoretic analysis of enterprise information security investment based on information sharing platform," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 595-606, April.
    6. Yong Wu & Gengzhong Feng & Richard Y. K. Fung, 2018. "Comparison of information security decisions under different security and business environments," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 69(5), pages 747-761, May.
    7. Xing Gao & Weijun Zhong, 2015. "Information security investment for competitive firms with hacker behavior and security requirements," Annals of Operations Research, Springer, vol. 235(1), pages 277-300, December.
    8. 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.
    9. Xing Gao & Weijun Zhong & Shue Mei, 2015. "Security investment and information sharing under an alternative security breach probability function," Information Systems Frontiers, Springer, vol. 17(2), pages 423-438, April.
    10. Kai-Lung Hui & Ping Fan Ke & Yuxi Yao & Wei T. Yue, 2019. "Bilateral Liability-Based Contracts in Information Security Outsourcing," Information Systems Research, INFORMS, vol. 30(2), pages 411-429, June.
    11. Xing Gao & Weijun Zhong, 2016. "Economic incentives in security information sharing: the effects of market structures," Information Technology and Management, Springer, vol. 17(4), pages 361-377, December.
    12. Kjell Hausken, 2017. "Security Investment, Hacking, and Information Sharing between Firms and between Hackers," Games, MDPI, vol. 8(2), pages 1-23, May.
    13. Xing Gao & Weijun Zhong & Shue Mei, 2013. "Information Security Investment When Hackers Disseminate Knowledge," Decision Analysis, INFORMS, vol. 10(4), pages 352-368, December.
    14. Yosra Miaoui & Noureddine Boudriga, 2019. "Enterprise security investment through time when facing different types of vulnerabilities," Information Systems Frontiers, Springer, vol. 21(2), pages 261-300, April.
    15. Xiaotong Li & Qianyao Xue, 2021. "An economic analysis of information security investment decision making for substitutable enterprises," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1306-1316, July.
    16. Yosra Miaoui & Noureddine Boudriga, 0. "Enterprise security investment through time when facing different types of vulnerabilities," Information Systems Frontiers, Springer, vol. 0, pages 1-40.
    17. Kjell Hausken, 2018. "Proactivity and Retroactivity of Firms and Information Sharing of Hackers," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 20(01), pages 1-30, March.
    18. Chenglong Zhang & Nan Feng & Jianjian Chen & Dahui Li & Minqiang Li, 0. "Outsourcing Strategies for Information Security: Correlated Losses and Security Externalities," Information Systems Frontiers, Springer, vol. 0, pages 1-18.
    19. Chenglong Zhang & Nan Feng & Jianjian Chen & Dahui Li & Minqiang Li, 2021. "Outsourcing Strategies for Information Security: Correlated Losses and Security Externalities," Information Systems Frontiers, Springer, vol. 23(3), pages 773-790, June.
    20. Xing Gao, 2020. "Open Source or Closed Source? A Competitive Analysis with Software Security," Decision Analysis, INFORMS, vol. 17(1), pages 56-73, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:43:y:2022:i:7:p:2748-2758. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.