Internet of Things Network Security Improvement Investment

Abstract

At present, businesses can reap impressive benefits from the Internet of Things (IoT). However, with the increasing number of IoT devices and the complexity of the IoT ecosystem, there is a growing concern about security vulnerabilities. This study aims to address the network security investment problem in an IoT environment by developing a game-theoretical model. It examines the impact of IoT service level and customer characteristics on the incentives for both the IoT platform and the manufacturer to invest in security, as well as the platform's profitability. Through analytical analysis, several noteworthy findings are obtained. Firstly, it is found that a higher IoT platform service level corresponds to a higher security responsibility. As a result, the platform needs to carefully consider the costs and benefits associated with security investment and service provision. Additionally, the research demonstrates that both the platform and the manufacturer's efforts to enhance security do not diminish, even when faced with increasing customer losses due to security breaches. This is because the IoT platform indirectly benefits a larger number of consumers who purchase smart devices, thus motivating the platform to prioritize network security efforts. Furthermore, the study reveals the influence of the unit security cost and the amount of highly sensitive customers on the security efforts undertaken by both the IoT platform and the smart device manufacturer. These results have important practical implications for firms operating within an IoT-based supply chain. Specifically, the findings can provide valuable decision-making guidance for enterprises seeking digital transformation and trying to make informed choices regarding platform operations.