On Cyber Warranties

guest · Mar 26, 2020

On Cyber Warranties
March 26, 2020
https://www.schneier.com/blog/archives/2020/03/on_cyber_warran.html

Interesting article discussing cyber-warranties, and whether they are an effective way to transfer risk (as envisioned by Akerlof's "market for lemons") or a marketing trick.
The conclusion:

Warranties must transfer non-negligible amounts of liability to vendors in order to meaningfully overcome the market for lemons. Our preliminary analysis suggests the majority of cyber warranties cover the cost of repairing the device alone.
Consumers should question whether warranties can function as a costly signal when narrow coverage means vendors accept little risk.

Worse still, buyers cannot compare across cyber-incident warranty contracts due to the diversity of obligations and exclusions. Ambiguous definitions of the buyer's obligations and excluded events create uncertainty over what is covered.
[...]
Our analysis has not touched upon the price of these products. It could be that firms with ineffective products pass the cost of the warranty on to buyers via higher prices.
Click to expand...

In conclusion, cyber warranties -- particularly cyber-product warranties -- do not transfer enough risk to be a market fix as imagined in Woods. But this does not mean they are pure marketing tricks either. The most valuable feature of warranties is in preventing vendors from exaggerating what their products can do. Consumers who read the fine print can place greater trust in marketing claims so long as the functionality is covered by a cyber-incident warranty.
Click to expand...

Cyber Warranties: Market Fix or Marketing Trick?

When buying a second-hand car you are at the mercy of the dealer. The dealer knows which cars were treated well by past owners and which are likely to break down within a few months. When buying an information security product, the vendor has a better idea of how effective the product truly is. In both cases, the seller has information the buyer lacks.
Click to expand...

Log in or Sign up

On Cyber Warranties

guest Guest

Log in or Sign up

On Cyber Warranties

guest Guest

Useful Searches