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Chapter: Security in Computing : The Economics of Cybersecurity

Current Research and Future Directions

Just as security concerns confidentiality, integrity, and availability, current research in cybersecurity economics focuses on the economic value and implications of these characteristics.

Current Research and Future Directions


Just as security concerns confidentiality, integrity, and availability, current research in cybersecurity economics focuses on the economic value and implications of these characteristics. The economics of cybersecurity is an emerging discipline. Its novelty and multidisciplinarity mean that, as with any new area of investigation, there is a scattering of information and much we do not yet know.


Current research in cybersecurity economics focuses on the interaction between information technology and the marketplace. When we buy or use software, we are involved in the market in several ways. First, the price we pay for software may depend on how much we trust it; some consumers trust freeware far less than they trust a branded, proprietary product for which they pay a substantial price. Second, some companies use the "softness" of software to charge more or less, depending on tradeoffs involving personal information. Third, the marketplace can be manipulated to encourage vendors to reduce the number of flaws in their products. In this section, we summarize the kinds of problems being addressed by today's research and describe several open questions yet to be answered.


Economics and Privacy


Andrew Odlyzko is taking a careful look at how economics and privacy interact, particularly with the increased use of differential pricing. As the cost of storing and analyzing data continues to decrease, businesses can easily capture data about customer behavior. Practices such as differential pricing encourage customers to part with personal information in exchange for lower prices. Many of us have "affinity cards" at supermarkets, office supply stores, bookstores, and more that give us special offers or discounts when we give the vendors permission to capture our buying behavior. Businesses can also monitor where and how we navigate on the web and with whom we interact. The differential pricing also constrains and modifies our behavior, as when we purchase airline or rail tickets online in exchange for lower fares than we would have paid by telephone or in person. We consider the privacy impacts of data collection and analysis in Chapter 10.


Economists Alessandro Acquisti and Hal Varian have analyzed the market conditions under which it can be profitable for an enterprise to use the privacy/pricing tradeoff. Many researchers are interested in the balance among personal, business, and societal costs and benefits.

On his web site, Acquisti asks, "Is there a sweet spot that satisfies the interests of all parties?"


Economics and Integrity


In Chapter 11 we discuss the pros and cons of sharing information about known vulnerabilities. Many researchers are investigating the economic tradeoffs.


Eric Resorla explains that because there are so many flaws in large software products, the removal of a single flaw makes no real difference; a malicious actor will simply find another flaw to exploit. He suggests that disclosure of a flaw's presence before it is patched encourages the malicious behavior in the first place. However, Ashish Arora, Rahul Telang, and Hao Xu argue in favor of disclosure. Their models suggest that without disclosure, there is no incentive for software vendors to find and patch the problems. Although disclosure increases the number of attacks, the vendors respond rapidly to each disclosure, and the number of reported flaws decreases over time. Interestingly, their analysis of real data reveals that open source projects fix problems more quickly than proprietary vendors, and large companies fix them more quickly than small ones.


Stuart Schechter examines how market forces can be used to prevent or decrease vulnerabilities. He suggests that economies establish markets where vulnerabilities can be traded. In such a market, the price for exploiting a product's vulnerability would indicate to consumers its level of security. Andy Ozment takes a similar, market-based approach, applying auction theory to analyze how vulnerability markets could be better run. He also discusses how such markets could be exploited by those with malicious intent.


Economics and Regulation


There is always heated argument between those who think the marketplace will eventually address and solve its own problems, and those who want a government entity to step in and regulate in some way. In security, these arguments arise over issues like spam, digital rights management, and securing the critical information infrastructure. Many researchers are investigating aspects of the cyber marketplace to see whether regulation is needed.


Consider spam: If most people had a highly effective spam filter, almost all spam would be filtered out before it appeared in the inbox, so the usefulness of spam would be greatly reduced to the sender and the volume of spam would drop. In a marketplace, when some (but not all) members take an action that benefits everyone, the ones who do not take the action are said to get a free ride. For example, if most people are vaccinated for an illness, then those who choose not to be vaccinated still benefit from the slowed progress of the disease because the disease does not spread rapidly through the vaccinated majority. In the same way, market regulationrequiring all users to employ a spam filtercould rid the world of spam. But lack of regulation, or some degree of free riding, might be good enough. Hal Varian has been investigating the effects of free riding on overall system reliability.


Many researchers investigating spam invoke economic models to suggest marketbased solutions to reducing unwanted electronic mail. For example, paying a small price for each e -mail messagecalled a micropaymentwould generate negligible charges for each consumer but could stop cold the spammer who sends out millions of messages a day.


A similar economic concept is that of an externality. Here, two people or organizations make a decision or enact a transaction, and a third party benefitseven though the third party played no role. Geoffrey Heal and Howard Kunreuther are examining security externalities, particularly where security problems have optimal solutions (from a computing point of view) that are not socially optimal. They are investigating the case in which there is a threat of an event that can happen only once, the threat's risk depends on actions taken by others, and any agent's incentive to invest in reducing the threat depends on the actions of others.


Copyright and digital rights management are frequent topics for regulatory discussion. Marc Fetscherin and C. Vlietstra are examining the business models of online music providers, particularly in how the price is determined for a given piece of music. They show that the price is affected by buyer's rights (to copy and move to portable players) as well as by geographic location and music label. Felix Oberholzer and Koleman Strumpf have examined records of downloads and music sales, showing that the downloads do no harm to the music industry.

This result is controversial, and several papers present dissenting views. Hal Varian discusses the broader problem of the effect of strict controls on innovation. He suggests that as control increases, those who are uncomfortable with risk will stop innovating.


In general, cybersecurity economics researchers are investigating how to use market forces to encourage socially acceptable security behavior.

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