TY  - JOUR
ID  - iiasa14093
UR  - https://pure.iiasa.ac.at/id/eprint/14093/
IS  - 1
A1  - Leduc, M.V.
A1  - Momot, R.
N2  - We study the incentives that agents have to invest in costly protection against cascading failures in networked systems. Applications include vaccination, computer security and airport security. Agents are connected through a network and can fail either intrinsically or as a result of the failure of a subset of their neighbors. We characterize the equilibrium based on an agent's failure probability and derive conditions under which equilibrium strategies are monotone in degree (i.e. in how connected an agent is on the network). We show that di_erent kinds of applications (e.g. vaccination, airport security) lead to very di_erent equilibrium patterns of investments in protection, with important welfare and risk implications. Our equilibrium concept is exible enough to allow for comparative statics in terms of network properties and we show that it is also robust to the introduction of global externalities (e.g. price feedback, congestion).
VL  - 5
TI  - Strategic investment in protection in networked systems
AV  - public
EP  - 139
Y1  - 2017/03/01/
PB  - Cambridge University Press
JF  - Network Science
KW  - Network Economics
KW  -  Network Games
KW  -  Local vs Global Externalities
KW  -  Cascading Failures
KW  -  Systemic Risk
KW  -  Immunization
KW  -  Airport Security
KW  -  Computer Security
SN  - 2050-1242
SP  - 108
ER  -