Journal article
Cybersecurity investments and cyber insurance purchases in a non-cooperative game
ASTIN Bulletin : The Journal of the IAA, Vol.55(2), pp.426-448
05/2025
DOI: 10.1017/asb.2024.40
Abstract
The growing concern over cyber risk has become a pivotal issue in the business world. Firms can mitigate this risk through two primary strategies: investing in cybersecurity practices and purchasing cyber insurance. Cybersecurity investments reduce the compromise probability, while cyber insurance transfers potential losses to insurers. This study employs a network model for the spread of infection among interconnected firms and investigates how each firm’s decisions impact each other. We analyze a non-cooperative game in which each firm aims to optimize its objective function through choices of cybersecurity level and insurance coverage ratio. We find that each firm’s cybersecurity investment and insurance purchase are strategic complements. Within this game, we derive sufficient conditions for the existence and uniqueness of Nash equilibrium and demonstrate its inefficiency. These theoretical results form the foundation for our numerical studies, allowing us compute firms’ equilibrium decisions on cybersecurity investments and insurance purchases across various network structures. The numerical results shed light on the impact of network structure on equilibrium decisions and explore how varying insurance premiums influence firms’ cybersecurity investments.
Details
- Title: Subtitle
- Cybersecurity investments and cyber insurance purchases in a non-cooperative game
- Creators
- Tim J. Boonen - University of Hong KongYang Feng - University of Science and Technology BeijingZhiwei Tong - University of Iowa
- Resource Type
- Journal article
- Publication Details
- ASTIN Bulletin : The Journal of the IAA, Vol.55(2), pp.426-448
- DOI
- 10.1017/asb.2024.40
- ISSN
- 0515-0361
- eISSN
- 1783-1350
- Publisher
- CAMBRIDGE UNIV PRESS
- Grant note
- Old Gold Summer FellowshipCollege of Liberal Arts and SciencesUniversity of Science and Technology Beijing
The authors thank the referees for their thoughtful and constructive comments, which bring valuable insights toward improving the manuscript. Zhiwei Tong appreciates the generous startup fund provided by the Department of Statistics and Actuarial Science and the Old Gold Summer Fellowship provided by the College of Liberal Arts and Sciences, both at the University of Iowa. Yang Feng appreciates the TP-A1 startup research grant provided by the University of Science and Technology Beijing.
- Language
- English
- Electronic publication date
- 01/13/2025
- Date published
- 05/2025
- Academic Unit
- Statistics and Actuarial Science
- Record Identifier
- 9984773418102771
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