The data breach can be understood through two economic theories. First, market failure occurred
because customers didn’t know their information was at risk. The company delayed informing
them, which hurt trust in the market. Second, transaction costs increased because customers now
have to spend time and effort checking for fraud, while the company faces costs to repair its
reputation and deal with the aftermath.
From a social science perspective, social exchange theory explains that customers trusted the
company with their personal information, but the breach broke that trust. Institutional theory
shows that the company had to follow legal rules, like notifying affected customers and
cooperating with law enforcement, to fix the situation and maintain its credibility. Overall, the
breach caused extra costs and damaged trust, and the company had to follow the rules to repair
its image.