The interdependent security problem in the defense industrial base: An agent-based model on a social network

This paper extends the Kunreuther and Heal game-theoretic model of the interdependent security problem by applying the model to an empirically based network environment. The scale-free network is derived from the contract-based organization of the defense industry. Theft of knowledge in this industry could have an impact on both economic and national security. However, imperfect information in the IT security market and the interdependent nature of the investment decision create the potential for underinvestment or overinvestment. An agent-based modeling technique demonstrates that social network topology may influence policy measures designed to induce tipping and cascading in cyber security investments.