Nico Popp suggests that incidents such as the recent Google hack may lead to governments and large corporations adopting a form of Mutually Assured Destruction cyber defense.
On one hand there is a lot of sense in this, especially for governments. However I suspect retaliation would be more of a economic (or worst case military) nature.
At some level that’s exactly what is going on with the Google case. Google obviously believes that the Chinese government is behind the attack and Google has retaliated by threatening to stop censoring content in China, even at the risk of getting thrown out of the country. Of course now they seem to be backing down and both sides are now looking for a face saving compromise.
But one problem with the MAD theory of cyber-warfare is that you most often don’t have any idea who to retaliate against. At least not with sufficient degree of certainty.
So for now, MAD looks pretty unlikely in the cyber-warfare game.