The vendors’ dilemma

Vendors of security products do not always provide accurate descriptions of the strengths and weaknesses of their offerings, although such behavior would benefit the industry as a whole. Mathematical game theory provides a framework for understanding why this happens, but it doesn’t tell us how to avoid the problems that this can cause.

The prisoners’ dilemma is a classic problem in game theory, the branch of mathematics that models the interactions of competitors and predicts their actions. In the prisoners’ dilemma, two prisoners who collaborated in a crime are interrogated separately. The police do not have enough information to convict either of the prisoners, but offer each of them a light penalty in return for informing on the other, who will then receive a harsher penalty. So if both prisoners remain silent then both are released and suffer no penalty; if only one informs on the other then one suffers a harsh penalty while the informant gets off with a light penalty; but if both inform on the other, then they both receive a light penalty. The best case for both prisoners is for them to both to refuse to inform, but we can expect this not to happen.

John Nash, the mathematician whose life was depicted in the movie A Beautiful Mind, was awarded the Nobel Prize in Economics in 1994 for his contributions to game theory.  Nash showed that when the prisoners’ dilemma is analyzed by rational participants we can expect to end up with both prisoners informing on their companion, so that both end up in a position that is not as good as they could achieved through cooperation. The uncertainty in their decision-making leads them to a decision that they would have avoided if they had better information.

The prisoners’ dilemma can give us some insight into the way in which technology vendors compete for customers. Vendors typically know more about their technology than their potential customers do, and vendors are tempted use their superior knowledge and experience to gain an advantage over customers during the sales cycle.

If all vendors fully explained the weaknesses as well as the strengths of their technology, then customers could make informed choices. But if one vendor decides to give customers misleading or incomplete information in order to gain sales at the expense of their competition, then they alone gain while their competitors all lose. Much like we can expect the prisoners in the prisoners’ dilemma decide that informing on the other, we can expect rational vendors to fully exploit the information advantage that they enjoy over their potential customers. This might be called "the vendors’ dilemma." Game theory tells us that the result that we can expect is that all vendors take advantage of their position relative to their customers in an effort to minimize the impact of similar tactics that they expect their competition to be using.

So game theory tells us to expect vendors to present inaccurate and incomplete views of their technology to customers and that this can result in a market failure when customer demand drops due to their inability to find high-quality products that are worth their price. It is likely that some security products have experienced market failures attributable to these mechanisms.

It has been estimated that over 50 percent of Public-Key Infrastructure (PKI) products sold ends up as "shelfware," software that is purchased yet never deployed. PKI software is fairly expensive, and it is reasonable to assume that corporate IT organizations did not intend to make a significant purchase they would not deploy. So why did people buy PKI software?

PKI vendors (which included the author of this post at one time) told their customers that PKI technology could solve many of their security problems by providing strong authentication, unbreakable encryption and legally-enforceable digital signatures. What the PKI vendors did not tell their customers was that virtually no existing applications used the digital certificates that their PKI software created and managed, so that it was very difficult to actually create a sound business case for purchasing PKI software. And while the PKI vendors boasted about the capabilities of their PKI toolkits for PKI-enabling applications, they didn’t mention the fact that the toolkits were just too complex for the average programmer to use.

The results were purchases of technology that could not live up to their expectations and whose limited benefits could not justify the cost of their deployment. Eventually the PKI market crashed. Both vendors and their customers felt the pain of this crash, all of which could have been avoided if vendors had been a bit more honest about the strengths and weaknesses of their technology.

The vendors’ dilemma tells us that we cannot expect vendors to give us an accurate picture of the strengths and weaknesses of their products, but you should try to get the best estimate of these before buying anything.

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