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The Vulnerability Paradox: Is Overinvestment in Reliability Luring or Should We Invest More and More?

Because society responds to increases in reliability by becoming less resilient to interruptions of critical infrastructures like electricity and information and communication technology (the vulnerability paradox), sometimes people conclude that investments in reliability have decreasing benefits and that we therefore should invest less than suggested by welfare calculations using constant costs of interruptions. Here, two explanations for the vulnerability paradox are studied: rational preparation and inefficient substitution caused by experience. In both cases, the marginal costs of interruptions increase with the reliability level, and investing in reliability becomes more (not less) attractive.