An Introduction to Key Themes in the Economics of Cyber-security

Privacy and Security

Article Snapshot


Neil Gandal


in Cyber Warfare and Cyber Terrorism, Lech J. Janczewski and Andrew M. Colarik, eds., IGI Global, 2007, pp. 78-82


This paper looks at how computer security problems like viruses are solved.

Policy Relevance

Markets are responding to develop solutions to computer security problems.

Main Points

  • Computer viruses and other software vulnerability can do billions of dollars in damage, but few computer users have updated virus protection.
  • One economic factor that affects security is that users do not use enough protection, because some of the costs of viruses are borne by others.
  • Another economic factor in security is “Network effects.” This means that a product becomes more valuable to a consumer when there are more other users. Microsoft software is more valuable because it is used by many people.
    • Network effects make security problems worse, because many people tend to use the same product and it is vulnerable to the same problems.
  • Markets have developed in cyber-security. Some firms pay users who detect and report software weaknesses. Software vendors are usually not involved.

Get The Article

Find the full article online

Search for Full Article