White or Black Hat? An Economic Analysis of Computer Hacking
Caitlin Brown · RePEc: Research Papers in Economics · 2015
Cyber attacks have increased sharply in recent years. This paper investigates the decision a profit-motivated hacker makes between working as a malicious hacker, called a black hat, and in cybersecurity as a white hat hacker. A key component of the model is the contest between white and black hats for some part of firm output that is vulnerable to attack. White and black hat earnings are increasing, nonlinear functions of the proportion of black hats. Multiple equilibria exist. Increasing the role of law enforcement in both apprehending black hats and the provision of computer security are shown to decrease the proportion of black hats in equilibrium.