Economics of Cyber Risk

3 Credits · Level: Graduate

This course examines cybersecurity challenges through an economic lens, exploring how market failures in the private sector create national security vulnerabilities and how market-based solutions can enhance security outcomes. Students will analyze why traditional markets "under-supply" cybersecurity, creating systemic risks that adversaries can exploit, and whether market mechanisms can address security gaps that regulation alone cannot fill. Drawing on insights from cyber insurance, trade policy, and regulatory economics, the course explores how information asymmetries distort cyber risk assessment, why critical infrastructure protection suffers from collective action problems, and how the concentration of cyber risk in key economic sectors creates strategic vulnerabilities. Topics include the economics of vulnerability disclosure and its implications for national defense, cyber insurance as a tool for resilience, international trade agreements as vehicles for cybersecurity norms, supply chain security through market incentives, and the optimal balance between market mechanisms and government intervention in protecting national security interests.