In answering what is the economic impact of cyber terrorism, and can organizations achieve strategic advantage in the game of cyber terrorism, the paper proposed a game theoretical model to study the optimal information systems (ISs) security investment and then applied it to compare the losses caused by cyber terrorists and hackers. Reviews on literature include IS security, IS security game theoretical models, cyber terrorism, cyber deterrence, and IS security breach function. Simulations with varying levels of attacker’s preference, breach function sensitivity and deterrence level are carried out to examine and detect sensitivity to the optimal IS security investment. The research concluded that organizations should invest more to protect their strategic information systems against cyber terrorists who have long-term goals.
