Modeling the LoJack Effect in the Cyber Security Market - A Study of Incentives
Abstract/Contents
- Abstract
- Cyber security has become a pertinent concern among businesses following the increasing digitization of operations. Hacking methods are ever evolving and businesses struggle to detect and respond promptly, as well as develop preventive measures against future attacks. It is widely acknowledged that cooperation is key in an industry’s efforts in combating cyber crime, and in my paper, I focus mainly on the financial services sector. There exists a network of collaboration within the sector, such as the Financial Services Information Security Analysis Center FSM ISAC, which facilitates the sharing of anonymized data about attack information among companies to improve situation awareness. However, in light of the private costs involved in investing in research, companies are reluctant to invest in R&D, preferring to act as free riders. I turn my focus to the LoJack industry within the auto theft market, which faces similar externalities and incentive problems. I model the incentive problems of both markets, analyzing the similarities and differences in network effects. Results show that although the LoJack model has significant positive externalities excludable private benefits incentivize car owners to invest in a LoJack. However, in the cyber security market, companies have little incentive to invest more than the bare minimum in research due to the contagion effects of both negative and positive externalities. Finally, I draw on the successes of the LoJack in deterring auto theft to apply them to better outline the opportunities for collaboration for cyber security within various industries.
Description
| Type of resource | text |
|---|---|
| Date created | May 2014 |
Creators/Contributors
| Author | Lee, Casatrina |
|---|---|
| Degree granting institution | Stanford University, Department of Economics |
| Primary advisor | Bresnahan, Timothy |
Subjects
| Subject | cyber security |
|---|---|
| Subject | incentives |
| Subject | modeling |
| Subject | LoJack |
| Subject | contagion effect |
| Subject | network effects |
| Subject | free rider |
| Subject | externalities |
| Subject | financial services |
| Subject | Stanford Department of Economics |
| Genre | Thesis |
Bibliographic information
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
Preferred citation
- Preferred Citation
- Lee, Casatrina. (2014). Modeling the LoJack Effect in the Cyber Security Market - A Study of Incentives. Stanford Digital Repository. Available at: https://purl.stanford.edu/qy653jf2520
Collection
Stanford University, Department of Economics, Honors Theses
View other items in this collection in SearchWorksContact information
- Contact
- econ@stanford.edu
Loading usage metrics...