Crying about a strategic wolf: A theory of crime and warning

Aaron Kolb and Vincent Conitzer

Journal of Economic Theory, 2020, vol. 189, issue C

Abstract: We analyze cheap talk warnings about a strategic adversary, with applications to cybersecurity and national security. Each period an expert receives a noisy private signal about whether an attack by the adversary is feasible. The expert wants to warn a decision maker while also maintaining credibility for future warnings, but unlike in a standard cheap talk game, the adversary can undermine the expert's credibility by delaying attack. While such delays increase “warning fatigue,” they also make the expert less tempted to exaggerate so as to avoid too many false alarms. We show that the net effect of a strategic adversary can be better incentive alignment between the expert and decision maker that benefits them both. Moreover, we show that sometimes the expert and decision maker benefit from the expert's ability to exaggerate, as this can induce more defensive action and more strategic delay.

Keywords: Warning systems; Cybersecurity; National security; Cheap talk; Repeated games (search for similar items in EconPapers)
JEL-codes: C73 D83 F52 K42 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:189:y:2020:i:c:s0022053120300880

DOI: 10.1016/j.jet.2020.105094

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