IMPACTS OF SUBSIDIZED SECURITY ON STABILITY AND TOTAL SOCIAL COSTS OF EQUILIBRIUM SOLUTIONS IN AN N-PLAYER GAME WITH ERRORS

Investment in defense by all agents is a socially optimum equilibrium in many interdependent security scenarios. However, practically, some agents might still choose not to invest in security due to bounded rationality and errors, thus decreasing the total social welfare. Previous work shows that providing subsidies may help induce more agents to invest. Our study suggests that giving subsidies to agents prone to making an erroneous choice could increase the stability of the socially optimum equilibrium, as well as decrease the total social costs.