2025 - Reprints: Operations Strategy and Sustainability Management
Cyberattacks, Operational Disruption, and Investment in Resilience Measures, Management Science, published online, December 2024
T. August, D. Noh, N. Shamir and H. Shin
(Reprint No.: 456)
Research No.: 05970100
With the increased frequency and magnitude of cyberattacks, policymakers and the private sector search for ways to counter this threat. One of the main initiatives suggested to achieve this goal is sharing cybersecurity-related information. Although the general belief is that information sharing can increase both industry profit and social welfare, it is unclear whether firms would voluntarily share such information. In this paper, we examine the incentives of firms to share cybersecurity-related information, how information sharing impacts investments in cyber resilience, and the aggregate impact on welfare. We find that firms only voluntarily share information in less competitive markets when the impact of the disruption is high. In all other cases, firms elect not to share information, despite potential welfare benefits. To facilitate information sharing, we investigate an exclusionary policy (i.e., sharing must be mutual) and demonstrate market conditions under which this policy incentivizes information sharing. However, when competition is intense, even the exclusionary policy is ineffective because it reduces industry profit. To inform stronger interventions, we examine firms being mandated to disclose their private cyberthreat information. We demonstrate that an opportunity does exist for such disclosure, particularly when the cost of investing in cyber resilience is high. However, policymakers must use caution with such a policy because applying this intervention when investment costs are not high leads to a steep reduction in welfare.
Information Provision from a Platform to Competing Sellers: The Role of Strategic Ambiguity, Manufacturing & Service Operations Management, 27(1), 269-286, 2025
T. Avinadav, T. Chernonog and N. Shamir
(Reprint No.: 457)
Research No.: 05922100
Problem definition: With the rapid growth of e-commerce, platforms are able to gather large quantities of data, which can result in high-precision predictions regarding consumer purchasing patterns and future demand. A fundamental question is whether a platform has the incentives and ability to share such nonverifiable information with its sellers. Methodology/results: We show that when information is nonverifiable, sharing the precise value of the platform’s private information by means of cheap-talk cannot result in an equilibrium. This outcome is due to the incentive of the platform to portray a more favorable market condition than that predicted, in order to encourage the sellers to raise their prices and improve market efficiency. In spite of this negative result, we demonstrate that the level of incentives misalignment between the platform and its sellers is bounded; consequently, a region-forecast information-sharing equilibrium can emerge. In this equilibrium, the support of the platform’s private information is divided into several intervals, and the platform strategically chooses to report truthfully the interval containing its private information. The structure of the partition is influenced by two main factors: the incentive of the platform to reduce market uncertainty for the sellers, and the motivation of the platform to soften competition among the sellers. Although both the sellers and the platform benefit from the ability to share some level of information, such an outcome hurts the consumers. Managerial implications: This work explains the observed practice of a platform providing nonverifiable information to its sellers via cheap-talk. The main advantage of this equilibrium is the ability to share information in a costless manner; however, the amount of information that can be shared is limited and is influenced by the level of market competition between the sellers.
Truth, trust, and trade-offs: When blockchain in supply chains backfires, European Journal of Operational Research, 326(3), 467-480, 2025
T. Avinadav and N. Shamir
(Reprint No.: 458)
Research No.: 05923100
We study the role of blockchain in achieving information transparency and generating trust in a dyadic supply chain with one retailer sourcing from a single supplier. The retailer has superior information regarding the demand distribution, whereas the supplier sets the capacity in preparation for the selling season. Two sources of risk are identified: information risk, which captures the incentives of the retailer to portray a favorable market condition to the supplier to encourage the supplier to secure an ample capacity, and demand risk, which captures the potential for lost sales or excess capacity investment, even when knowing the correct demand distribution. We demonstrate how blockchain eliminates information risk for the supplier. As an alternative to blockchain, we analyze a commitment contract where the retailer can order in advance a certain number of units; this commitment can serve as a signaling tool to convey market information to the supplier. We argue that the commitment contract can eliminate the information risk for the supplier (as can blockchain), but it can also reduce the supplier’s demand risk. We conclude that in many instances, the supplier and the supply chain can become worse off when blockchain is used, while the retailer favors this technology.
