The file given is an example of a letter notified of a data breach. It mostly discusses the event of someone getting into customer information without permission. Even though the letter doesn’t discuss economic or social science ideas directly, we can figure out how they might apply to the situation being described.
#1. Theories of economics
(a) Information Asymmetry:
The idea behind this theory is that in many deals, one side has more or better information than the other. In the case of the data breach, buyers didn’t know about it until the company told them, which made the information less balanced. When it comes to the letter, the fact that the company didn’t tell customers about the breach until after the law enforcement body had investigated it indicates that the company has more information than its customers. Customers suffered because they remained unaware of the stolen data for months.
(b) Externalities:
What are externalities? Externalities are costs or rewards that affect people who did not choose to bear them. Negative effects happen when a business does something that hurts other people.
Linked to the letter: The data breach is an example of a negative externality because customers were hurt when someone broke into the platform provider’s systems and saw their personal and payment information. Customers may now have to deal with identity theft and scams, which are costs they would rather not have.
#2. Theories in the social sciences
(a) Trust in Society:
Social trust refers to people’s faith in the honesty and dependability of institutions and other people. Trust is a key part of keeping people together and getting things done.
The company and its customers may not trust each other as much after the data hack. The breach and the delay in informing customers may make them less likely to do business with the company again.
(b) Risk Perception:
The way people or groups think about the possible dangers they face is called risk perception. Factors such as personal experience, gathered knowledge, and faith in authorities influence risk perception.
Linked to the letter: The letter is meant to manage customers’ sense of risk by telling them about the breach and giving them steps to take to protect themselves from identity theft or scams. The company is trying to change how customers see and react to the risk by telling them about the hack and giving them advice.
If you want to know how the data breach affected the economy and society, these ideas can help.