Expanding the Gordon-Loeb model to cyber-insurance

We present an economic model for decisions on competing cyber-security and cyber-insurance investment based the Gordon-Loeb in information security. consider a one-period scenario which firm may invest security measures to reduce probability of breach, or combination both. The optimal insurance under assumptions is investigated via consideration costs benefits alongside purchasing at independent premium rate. Under both exponential (constant absolute risk aversion) logarithmic relative utility functions it found that when below certain value, maximised with investment. These results suggest worthwhile undertaking provided not overly costly. believe this be first attempt integrate into classical microeconomic analysis insurance, particularly using breach determine claim. follows tradition being accessible practitioners decision makers