Internet Security, Vulnerability Disclosure, and Software Provision
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In this paper, we examine how software vulnerabilities affect firms that sell software and consumers that purchase software. In particular, we model three decisions of the firm: (I) an upfront investment in the quality of the software to reduce potential vulnerabilities, (II) a policy decision whether to announce vulnerabilities, (III) and a price for the software. We also model two decisions of the consumer: (I) whether to purchase the software and (II) whether to apply a patch.