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A Simple Economic Model to Explain Different Digitization Patterns

A Simple Economic Model to Explain Different Digitization Patterns
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Year:    2020

Author:    Bartholomae, Florian W.

Applied Economics Quarterly, Vol. 66 (2020), Iss. 4 : pp. 239–257

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.

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Journal Article Details

Publisher Name:    Global Science Press

Language:    German

DOI:    https://doi.org/10.3790/aeq.66.4.239

Applied Economics Quarterly, Vol. 66 (2020), Iss. 4 : pp. 239–257

Published online:    2020-10

AMS Subject Headings:    Duncker & Humblot

Copyright:    COPYRIGHT: © Global Science Press

Pages:    19

Keywords:    cybercrime digitization decision dominant strategy duopoly Germany D24 L13 L2

Author Details

Bartholomae, Florian W.

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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