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Optimal solution to cybercrimes: lessons from law and economics

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  • Ruperto P. Majuca

    (De La Salle University)

Abstract

A model is presented wherein cybercrimes are addressedÊthrough a combination of private and public measures. ThisÊcaptures the substitutability of private and public responses andÊdetermines the optimal combination of these approaches. TheÊsocially optimal level of security is achieved by equalizing theÊmarginal-benefit-to-marginal-cost ratios of each of the threeÊalternatives: private security investment, nonrivalrous securityÊinvestment, and law enforcement measures. The interrelatednessÊof Internet risks causes individual firms to underinvest in privateÊand public security goods. The government thus lowers theÊlevel of police enforcement expenditures to induce firms toÊinvest more in individual precautions. In certain conditions,Êcooperation results in socially optimal levels of expenditures inÊprivate and public security goods. The Shapley [1953] value canÊbe used as a criterion for allocating the costs and benefits amongÊthe members of a security cooperative

Suggested Citation

  • Ruperto P. Majuca, 2014. "Optimal solution to cybercrimes: lessons from law and economics," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 51(1), pages 84-116, June.
    • Handle: RePEc:phs:prejrn:v:51:y:2014:i:1:p:84-116
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/904/804
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    References listed on IDEAS

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    More about this item

    Keywords

    law and economics; cybersecurity; interrelated risks; public goods; law enforcement;
    All these keywords.

    JEL classification:

    • K0 - Law and Economics - - General

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