Closing the price of anarchy gap in the interdependent security game

Abstract

Investments in security technologies by strategic users is typically modeled as a public good problem, known as the Interdependent Security (IDS) game. The equilibria for such games are often inefficient, as selfish users free-ride on positive externalities of others' contributions. We present a mechanism that implements the socially optimal equilibrium in an IDS game through a message exchange process; this mechanism does not need to monitor or audit users. However, it does not necessarily guarantee voluntary participation, often a trivial condition to satisfy in many resource allocation problems, but made much harder due to the incentive to stay out and free-ride on others' investments. We discuss the role of cyber insurance in this setting.