Network externality and incentive to invest in network security

Chun Hsiung Liao, Chun Wei Chen

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)


Breaches of network security can result in substantial losses for businesses. A game theory-based model is developed to investigate in the short run how network externality influences the optimal strategy of competing online firms producing homogenous services to invest in NS. A firm's self-protect rate and survival probability against NS security incidents differ depending on its related investment decisions. The incentive of a firm to invest in NS is derived, and the impact of the survival probability and the effect of the number of firms investing in NS on a firm's incentive to invest in NS are also analyzed. Policy implications drawn from the study are provided at the end the work.

Original languageEnglish
Pages (from-to)398-404
Number of pages7
JournalEconomic Modelling
Publication statusPublished - 2014 Jan

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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