This paper examines investments in cybersecurity made by users and software providers with a focus on the latter's concerning attack prevention and damage control. I show that full liability, whereby the provider is liable for all damage, is inefficient, owing namely to underinvestment in attack prevention and overinvestment in damage control. On the other hand, the joint use of an optimal standard, which establishes a minimum compliance framework, and partial liability can restore efficiency. Implications for cybersecurity regulation and software versioning are discussed.
|Number of pages||10|
|Journal||Information Economics and Policy|
|Early online date||19 Oct 2016|
|Publication status||Published - Dec 2016|
- Bilateral care