Date Added: Mar 2012
Recent incidents of cyber-security violations have revealed the importance of having firewalls and other intrusion detection systems to monitor traffic entering and leaving access networks. But the adoption of such security measures is often stymied by 'Free-riding' effects and 'Shortsightedness' among Internet Service Providers (ISPs). In this paper, the authors develop an analytical framework that not only accounts for these issues, but also incorporates technological factors, like asymmetries in the performance of bidirectional firewalls. Results on the equilibrium adoption and stability are presented, along with detailed analysis on several policy issues related to social welfare, price of anarchy, and price of shortsightedness.