The Prevention and Mitigation of Breaches of Personal Information Databases: A Theoretical Framework

Abstract

It seems that everything, from our cars to the search engines we use, collects information about us and our activities. Breaches compromising personal information are an unfortunate by-product of our modern information-intensive society. In this paper, we examine previous research on this problem from diverse perspectives. We then develop an interdisciplinary framework that examines parties involved, benefits derived by each party, losses from a breach and the ability of each party to mitigate losses. Within this framework, appropriate economic theories are extended to other types of breaches and frauds.

Keywords: Cyber-law, data breach, database, negative externalities, liability, loss allocation rules, public policy, privacy, privacy by design, data security

JEL Classification: D18, D39, D23, D62, D78, D73, D82, D83, F42, K29, K42, L86, M14, M19, O3, O33, O34, O38