Two economic theories explain the analysis of the data breach letter. Cost-Benefit Analysis (CBA) enables the company to make the decision to warn its customers about the breach because the possible long-term costs outweigh immediate notification costs even though misuse is unconfirmed. Providing notification to customers allows the company to prevent long-term expenses from increasing because of reputation harm and customer loss even though it requires short-term expenses for both communication and recovery tasks. The Market Failure Theory shows how the company’s data protection system operated inadequately thus causing customer harm. The company implements these customer support services and notifications to address market failure while building customer trust. The relationship between the company and its customers faces detrimental impacts because of the breach according to Trust Theory in social sciences. These measures aim to both restore vital customer trust because losing this trust would lead to reduced customers and decreased business operations. Modern society deals with expanding perils including technological risks through the Risk Society Theory which Ulrich Beck developed. These risks materialized in the breach of data which the company successfully managed by responding to consumer protection needs in our digital society.
