Published on: 18-Apr-2018
Professor Wang will present economic models of cybersecurity investments by a firm, first considering the cost-benefit to the firm itself, and then to the eco-system of a supply-chain.
He introduces a concept of a firm’s security knowledge set of its attack surface, relative to the universe of threats.
He then proposes three classes of security production functions as the frontier curve of a firm’s knowledge set. Professor Wang distinguishes two types of security investments in acquiring data, information and expertise, vis-à-vis deploying defense measures and detection tools, and derives formula for optimal allocations.
He also analyzes cyber breach propagations between firms in a supply-chain, and demonstrates that large firms requiring contractors to show security ratings by third parties can be an effective way of reducing information gap in a supply chain.
Finally, he presents a model for the reliability (sharpness) of cybersecurity rating for firms, and shows how the perceived reliability of cybersecurity rating affects the incentives for firms to increase their security investments.
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