Value of Information on Resilience Decision-Making in Repeated Disaster Environments

Abstract

This paper reports on a series of controlled experiments with human subjects on the decision of firms to invest in resilience to mitigate supply-chain disruptions and their willingness to pay for advisory information to improve resilience planning investments. Here we focus specifically on strategic inventories, which have been identified in the supply chain and economic resilience literatures to be a core resilience-building tactic. Of critical importance to organizations such as the Department of Homeland Security (DHS) and state and county offices of emergency management, we find that firms are willing to pay for external resilience information when they operate in information-poor environments. We also find that when firms purchase resilience information, they are less susceptible to the decision-making bias known as the gambler’s fallacy, which has been shown to adversely affect firms operating in repeated disaster environments. This paper is one of the first of its kind to conduct experimental analysis on a national subject population of CEOs and COOs in the context of resilience. The results inform resilience planning efforts for public- and private-sector firms and organizations, with broad implications for the use of informational policy instruments to build economic resilience.