Bug Bounty Programs for Third-Party Software: Adoption Strategy and Effectiveness Analysis
COM3 Level 1
SR12, COM3 01-21
Abstract:
Bug bounty programs (BBPs) reward external hackers for identifying and reporting software vulnerabilities. As the number of security issues caused by third-party applications has significantly increased, many digital platforms are considering launching BBPs to improve the reliability of third-party software. We develop an analytical model to explore the dynamics between platforms, third-party vendors, and external hackers within the context of BBPs. Our findings highlight key factors influencing their adoption decision-making, such as the potential loss from security breaches and the efficiency of vendors' internal reliability investments. We show that while BBPs can improve third-party software reliability under certain conditions, they can also lead to unintended consequences, such as reduced vendor investment in initial software reliability. In some cases, BBPs may even result in decreased social welfare, and consumers may end up using less reliable software. We further investigate how platforms can optimize their BBP strategies, including the revenue-sharing scheme and BBP reward, to align the incentives of vendors and enhance the effectiveness of BBPs. Through our analysis, we provide actionable recommendations for platforms seeking to maximize the benefits of BBPs, particularly when dealing with heterogeneous third-party vendors.
Bio:
Dr. Ma Dan is an Associate Professor of Information Systems and Management at Singapore Management University. She obtained her Ph.D. degree in Computers and Information Systems from Simon School of Business at University of Rochester. Her research interest focuses on the strategic interactions of information technology (IT) and business, for examples, the economics of Software-as-a-Service business model analysis, innovative technology adoption in financial services market, and platform-based business model innovations. Her works have been appeared in top research journals such as Information Systems Research, Management Information Systems Quarterly, The Journal of Management Information Systems, and Decision Support Systems. She also serves as Associate Editor at several IS journals including Information and Management, Information Technology and Management, Electronic Commerce Research and Applications, and Decision Support Systems(special issue).