The Ecology of Terror Defense

Keohane, Nathaniel O.; Zeckhauser, Richard

doi:10.1007/978-1-4757-6787-2_6

Cited by 64 publications

(53 citation statements)

References 10 publications

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“…The income of firms and external agents fluctuate over time, interdependence between firms fluctuate over time according to market conditions, and agents make substitutions through time, sometimes accumulating resources during times when investments are high, awaiting the optimal times for attack. Keohane and Zeckhauser (2003) find that the optimal control of terror stocks relies on both periodic cleanup and ongoing abatement, a logic that applies for the control of public bads such as pollution, and may apply also for security investment to combat cyber attacks. The intuition is that the economy of scale in reducing the cyber threat may make it optimal to do so only periodically.…”

Section: Future Research and Limitations Of The Current Workmentioning

confidence: 99%

Income, interdependence, and substitution effects affecting incentives for security investment

Hausken

2006

Journal of Accounting and Public Policy

117

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Firms in cyber war compete with external intruders such as hackers over their assets. Each firm invests in security technology when the required rate of return from security investment exceeds the average attack level, or when the formal control requirements dictate investment. Each firm invests maximally in security when the average attack level is 25% of the firm's required rate of return. The income effect eliminates or ''freezes'' parts of the agent's resource, attack tools, and competence. The security investment decreases in the income reduction parameter when the agent's resource is low, is inverse U shaped when the resource is intermediate, and drops to zero when the external threat is overwhelming. A sufficiently strong income effect eliminates the external threat. When two firms are interdependent, security investments and attacks impact both firms. With increasing interdependence, each firm free rides by investing less, suffers lower profit, while the agent enjoys higher profit. The substitution effect causes the agent to allocate his attack optimally between the firms. The attack distribution is endogenized. Each firm's security investment increases in its asset and investment efficiency. The attack against each firm increases in the product of the firm's asset and investment inefficiency. Specific analyses are made of how the substitution effect impacts security investment for differently sized firms.

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Section: Future Research and Limitations Of The Current Workmentioning

confidence: 99%

Income, interdependence, and substitution effects affecting incentives for security investment

Hausken

2006

Journal of Accounting and Public Policy

117

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“…6 See Economist, March 8, 2008, p. 69. 7 See Keohane and Zeckhauser (2003). 8 Cadigan and Schmitt (2010) verify, using laboratory experiments, the finding that negative externalities produce overinvestment in deterrence expenditures.…”

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confidence: 94%

The Interdependence Between Homeland Security Efforts of a State and a Terrorist’s Choice of Attack

Mathews

Lowenberg

2012

Conflict Management and Peace Science

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Consider a state that chooses security levels at two sites (Targets A and B), after which a terrorist chooses which site to attack (and potentially a scope of attack).The state values A more highly. If the state knows which target the terrorist values more highly, he will choose a higher level of security at this site. Under complete information, if the terrorist's only choice is which site to attack, the state will set security levels for which the terrorist prefers to attack A over B if and only if the ratio of the value of B to the value of A is greater for the state than for the terrorist. When the state has incomplete information on the terrorist's target values, the optimal security levels may be such that: a target is completely undefended (but attacked with positive probability); the probability of attack is greater at A than at B; and the expected damage from an attack is greater at A than at B. In total, the results reveal that the state's choice of security is heavily influenced by the terrorist's target valuations.

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“…Determining the nature of such substitutions is of substantial interest, see e.g. Enders and Sandler (2003), Hausken (2006), and Keohane and Zeckhauser (2003).…”

Section: Introductionmentioning

confidence: 99%

Game Theoretic Analysis of Standby Systems

Hausken¹

2012

Advanced Topics in Applied Operations Management

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The Ecology of Terror Defense

Cited by 64 publications

References 10 publications

Income, interdependence, and substitution effects affecting incentives for security investment

Income, interdependence, and substitution effects affecting incentives for security investment

The Interdependence Between Homeland Security Efforts of a State and a Terrorist’s Choice of Attack

Game Theoretic Analysis of Standby Systems

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