Despite the Challenges Ahead, It Falls on Government to Adopt a Three-Pronged Strategy to Improve IoT Security

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1Q 2019 | IN-5424


IoT Security and the Principal-Agent Problem


Regulatory measures are highly prone to coordination problems. This is why we can apply the principal-agent problem to understand the complexity of IoT security regulation. The principal-agent problem occurs when one person or entity, an “agent,” (e.g. the government) is able to make decisions that impact another person or entity: the "principal" (e.g. device manufacturer). This dilemma exists in circumstances where agents are motivated to act in their own best interests in ways that are contrary to the interests of their principals. IoT Security Regulation provides us with multiple instances of how the misalignment of interests identified by the principal-agent problem is exacerbated by the fast-changing nature of IoT technologies. Regulation of IoT and the alignment of government and vendor interests is increasingly difficult because of (1) the speed at which innovation in cyber threat makes government regulation ineffective, (2) the secondary effect of companies becoming inactive because of uncertainty about the effectiveness of go…

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