Cybersecurity and platform competition in the cloud

Cloud computing services are examples of platforms in the classic sense of the economics of two-sided markets. In particular, indirect externalities arise in the cloud from connecting users with developers of complementary products or services. The premise investigated here is that a cloud provider's security is subject to the same rigors of two-sided market competition that shape a cloud provider's pricing and strategy. In so doing, this study demonstrates how cybersecurity shapes cloud competition and cloud competition shapes cybersecurity. Specifically, cybersecurity is shown to be a user-side phenomenon with characteristics that can lead to the coexistence of cloud services providers rather than monopoly. In addition, a user's switching costs are characterized in terms of the ratio of the potential consequence of a class break under a user's current provider against that of the competition. Finally, a component of cybersecurity is identified for which there is no technical solution.