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

Xinbao Liu, Xiaofei Qian (), Jun Pei () and Panos M. Pardalos
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Xinbao Liu: Hefei University of Technology
Xiaofei Qian: Hefei University of Technology
Jun Pei: Hefei University of Technology
Panos M. Pardalos: University of Florida

Journal of Global Optimization, 2018, vol. 70, issue 2, No 7, 413-436

Abstract: 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.

Keywords: Information security investment; Information sharing; Differential game; Complementary firms; Steady state (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10898-017-0585-y

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