2024/08/14 by Jens Gudmundsson, Gudmundsson, Jens, Jens Leth Hougaard +3 · 1 citation
Computer Science · #Cloud Computing and Resource Management #Distributed systems and fault tolerance #FOS: Economics and business #Software System Performance and Reliability #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2408.07361
openalex publication_date 2024/08/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Interconnected agents such as firms in a supply chain make simultaneous preparatory investments to increase chances of honouring their respective bilateral agreements. Failures cascade: if one fails their agreement, then so do all who follow in the chain. Thus, later agents' investments turn out to be pointless when there is an earlier failure. How losses are shared affects how agents invest to avoid the losses in the first place. In this way, a solution sets agent liabilities depending on the point of disruption and induces a supermodular investment game. We characterize all efficient solutions. These have the form that later agents -- who are not directly liable for the disruption -- still shoulder some of the losses, justified on the premise that they might have failed anyway. Importantly, we find that such indirect liabilities are necessary to avoid unbounded inefficiencies. Finally, we pinpoint one efficient solution with several desirable properties.