Hacker Behavior, Network Effects, and the Security Software Market

Journal of Management Information Systems, Vol. 29, No. 2, Fall 2012, pp. 77-108

Posted: 13 May 2011 Last revised: 6 Feb 2013

See all articles by Debabrata Dey

Debabrata Dey

University of Kansas - School of Business

Atanu Lahiri

University of Texas at Dallas, Naveen Jindal School of Management

Guoying Zhang

Midwestern State University

Abstract

The market for security software has witnessed an unprecedented growth in recent years. A closer examination of this market reveals certain idiosyncrasies that are not observed in a traditional market. For example, it is a highly competitive market with over eighty vendors. Yet, the market coverage is relatively low. Prior research has not attempted to explain what makes this market so different. In this paper, we develop an economic model to find possible answers to this question. Our model uses existing classification of different types of attacks and models their resulting network effects. We find that the negative network effect from indirect attacks, which is further enhanced by value-based targeted attacks, provides a possible explanation for the unique structure of this market. Overall, our results highlight the unique nature of the security software market, furnish rigorous arguments for several counterintuitive observations in the real world, and provide managerial insights for vendors on market competition.

Keywords: Market structure, mass attacks, negative network effect, network effect, oligopoly, pricing, security software, strategic hacker, targeted attacks

Suggested Citation

Dey, Debabrata and Lahiri, Atanu and Zhang, Guoying, Hacker Behavior, Network Effects, and the Security Software Market. Journal of Management Information Systems, Vol. 29, No. 2, Fall 2012, pp. 77-108, Available at SSRN: https://ssrn.com/abstract=1838656 or http://dx.doi.org/10.2139/ssrn.1838656

Debabrata Dey (Contact Author)

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States
785-864-1895 (Phone)

Atanu Lahiri

University of Texas at Dallas, Naveen Jindal School of Management ( email )

University of Texas at Dallas
Richardson, TX 75080
United States

Guoying Zhang

Midwestern State University ( email )

3410 Taft Boulevard
Wichita Falls, TX usa 76308
United States

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