Network Externality and Incentive to Invest in Network Security

• Main Authors: Chun-WeiChen, 陳俊偉
• Other Authors: Chun-Hsiung Liao
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/76060455561280617097

博士 === 國立成功大學 === 交通管理科學系 === 102 === In today’s information-based economy, the network evolution is one of the greatest innovations and has changed lives of individuals and business organizations. Computer technology and the Internet play a ubiquitous role in economic activities related to consumption and transactions. Home shopping Home economics has been booming in recent decades since public consumption behavior has substantially changed. For this reason most organizations depend on information technology (IT) systems to store, process and exchange critical information with their customers, partners and shareholders. This dependency comes along with major risks to the information and its IT systems. As a result Network security incidents frequently occur along with the rapid evolution of new cyber crimes. Breaches of network security can result in substantial losses for businesses. With the results of shown in 2008 CSI/FBI computer crime and security survey, the average loss per respondent was $288,618 for 144 respondents, down from $345,005 in 2007, but up from the low of $167,713 in 2006. This is the main reason why organizations are investing in Network security systems, which are designed to protect the confidentiality, integrity and availability of information assets. The importance of information security has led many organizations to pay close attention to related investment decisions. This research examined how network externality influences the optimal strategy of a firm with regard to investments in network security (NS). A theory-based model is developed to investigate in the short run how network externality influences the optimal strategy of competing online firms producing homogenous services related to investment in NS. The incentive of a firm to invest in NS is derived, and the impact of the survival probability, market size, and the effect of the number of firms investing in NS on a firm’s incentive to invest in NS are also analyzed. Policy implications drawn from the research are provided at the end the work.