eprintid: 14093
rev_number: 11
eprint_status: archive
userid: 353
dir: disk0/00/01/40/93
datestamp: 2016-12-07 08:49:31
lastmod: 2021-08-27 17:28:13
status_changed: 2016-12-07 08:49:31
type: article
metadata_visibility: show
item_issues_count: 1
creators_name: Leduc, M.V.
creators_name: Momot, R.
creators_id: 8754
title: Strategic investment in protection in networked systems
ispublished: pub
divisions: prog_asa
keywords: Network Economics, Network Games, Local vs Global Externalities, Cascading Failures, Systemic Risk, Immunization, Airport Security, Computer Security
abstract: 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).
date: 2017-03-01
date_type: published
publisher: Cambridge University Press
id_number: 10.2139/ssrn.2515968
creators_browse_id: 176
full_text_status: public
publication: Network Science
volume: 5
number: 1
pagerange: 108-139
refereed: TRUE
issn: 2050-1242
coversheets_dirty: FALSE
fp7_project: no
fp7_type: info:eu-repo/semantics/article
citation:   Leduc, M.V. <https://pure.iiasa.ac.at/view/iiasa/176.html> & Momot, R.  (2017).  Strategic investment in protection in networked systems.   Network Science 5 (1) 108-139. 10.2139/ssrn.2515968 <https://doi.org/10.2139/ssrn.2515968>.       
document_url: https://pure.iiasa.ac.at/id/eprint/14093/1/Strategic%20Investment%20in%20Protection%20in%20Networked%20Systems.pdf