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The economics of information security investment
Abstract
This article presents an economic model that determines the optimal amount to invest to protect a given set of information. The model takes into account the vulnerability of the information to a security breach and the potential loss should such a breach occur. It is shown that for a given potential loss, a firm should not necessarily focus its investments on information sets with the highest vulnerability. Since extremely vulnerable information sets may be inordinately expensive to protect, a firm may be better off concentrating its efforts on information sets with midrange vulnerabilities. The analysis further suggests that to maximize the expected benefit from investment to protect information, a firm should spend only a small fraction of the expected loss due to a security breach.
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Citations
Cited by
Goldfarb, A., & Tucker, C. (2019) · Journal of Economic Literature · doi:10.1257/jel.20171452 · Cited by 2,744
Future developments in cyber risk assessment for the internet of things
Radanliev, P., De Roure, D. C., Nicolescu, R., Huth, M., Montalvo, R. M., Cannady, S., & Burnap, P. (2018) · Computers in Industry · doi:10.1016/j.compind.2018.08.002 · Cited by 162
Cybersecurity Hazards and Financial System Vulnerability: A Synthesis of Literature
Uddin, M. H., Ali, M. H., & Hassan, M. K. (2020) · Risk Management · doi:10.1057/s41283-020-00063-2 · Cited by 141
Patel, S. C., Graham, J. H., & Ralston, P. A. S. (2008) · International Journal of Information Management · doi:10.1016/j.ijinfomgt.2008.01.009 · Cited by 90
Future developments in standardisation of cyber risk in the Internet of Things (IoT)
Radanliev, P., De Roure, D. C., Nurse, J. R. C., Mantilla Montalvo, R., Cannady, S., Santos, O., Maddox, L., Burnap, P., & Maple, C. (2020) · SN Applied Sciences · doi:10.1007/s42452-019-1931-0 · Cited by 91
Metadata
- Authors
- Gordon, L. A., & Loeb, M. P.
- Venue
- ACM Transactions on Information and System Security
- Published
- 2002-11
- Volume
- 5
- Issue
- 4
- Pages
- 438-457
- ISSN
- 1094-9224 (ISSN-L)
- 1557-7406
- OpenAlex
- W2056075452
- Cited by
- 1,335
- References
- 0
- FWCI
- 47.87
- Type
- journal article
- Language
- en
- Open access
- closed
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- Gordon, L. A., & Loeb, M. P. (2002). The economics of information security investment. ACM Transactions on Information and System Security. https://doi.org/10.1145/581271.581274
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
