Analyzing information security investment in networked supply chains

Security breaches and attacks are becoming a more critical and, simultaneously, a challenging problems for many firms in networked supply chains. A game theory-based model is developed to investigate how interdependent feature of information security risk influence the optimal strategy of firms to invest in information security. The equilibrium levels of information security investment under non-cooperative game condition are compared with socially optimal solutions. The results show that the infectious risks often induce firms to invest inefficiently whereas trust risks lead to overinvest in information security. We also find that firm's investment may not necessarily monotonous changes with infectious risks and trust risks in a centralized case. Furthermore, relative to the socially efficient level, firms facing infectious risks may invest excessively depending on whether trust risks is large enough.