A game theory model of cybersecurity investments with information asymmetry

In this paper, we develop a game theory model consisting of sellers and buyers with sellers competing non-cooperatively in order to maximize their expected profits by determining their optimal product transactions as well as cybersecurity investments. The buyers reflect their preferences through the demand price functions, which depend on the product demands and on the average level of security in the marketplace. We demonstrate that the governing equilibrium conditions of this model with security information asymmetry can be formulated as a variational inequality problem. We provide qualitative properties and propose an algorithmic scheme that is easy to implement. Three sets of numerical examples are presented which reveal the impacts of the addition of buyers and sellers and a variety of changes in demand price and investment cost functions on the equilibrium product transaction and security level patterns.