Gaming the System: Decision Making by Interdependent Critical Infrastructure

Supporting strong, resilient, and integrated critical infrastructure is vital to upholding the U.S. economy and its national security. Arguably, no sector of the economy could exist without the reliable and predictable networks on which it depends. To date, the research on interdependent infrastructure has concentrated on describing the sources of the dependencies and developing models for predicting performance and cascading disruptions after a hazardous event. However, these models fail to capture the perspective of the operators of these networks and how competing, independent objectives lead to suboptimal investment decisions and hence suboptimal network performance. Rather than focus on how interdependent infrastructures operate and possibly fail, we take the perspective of their operators and ask why they make the decisions that they do. The goal of this paper is to demonstrate how strategic interdependencies may impact performance of coupled systems by shifting investments away from what is collectively best toward decisions that are more myopic and optimal from the perspective of a single infrastructure. Through our model, we make inferences on the level of investments networks make, relate this to performance, and provide policy recommendations on how to promote reliable infrastructure.