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A Simple Economic Model to Explain Different Digitization Patterns
Applied Economics Quarterly, Vol. 66 (2020), Iss. 4 : pp. 239–257
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Florian W. Bartholomae, Professor of Economics, Munich Business School, Elsenheimerstr. 61, 80687 Munich, Germany, and Privatdozent, Bundeswehr University Munich.
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Abstract
Many firms have to decide whether and how much of their business activities they want to digitize. Several studies point to considerable differences, especially between small- and large-sized firms. This paper develops a simple model that shows under which conditions digitization can be profitable for a firm. At first, different competitive situations are taken into account and subsequently, the effects of security problems on digitization decisions are examined using the example of the dangers of a cyberattack. The results show that digitization is a dominant strategy, which results in a prisoner’s dilemma if the competition is fierce. Moreover, in highly competitive markets, firms should set common security standards to protect against unauthorized access.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Florian W. Bartholomae: A Simple Economic Model to Explain Different Digitization Patterns | 1 | ||
| Abstract | 1 | ||
| 1. Introduction | 1 | ||
| 2. Simple Model of Digitization Decision | 2 | ||
| 3. Digitization and Cybercrime | 9 | ||
| 4. Decision for Data Security | 1 | ||
| 5. Conclusion and Recommendations for Action | 1 | ||
| References | 1 |