InoperabilityInput-OutputModel(IIM)withMultipleProbabilistic.doc

Inoperability Input-Output Model (IIM) with Multiple Probabilistic Sector Inputs Joost R. Santos Department of Systems and Information Engineering, University of Virginia, Charlottesville, Virginia 22904, jrs8e@ The increasing degree of interdependencies among sectors of the economy can likely make the impacts of natural and human-caused disruptive events more pronounced and far-reaching than before. An extended input-output model is implemented in this paper to analyze risk scenarios to a particular sector and to estimate the resulting ripple effects to other sectors. The proposed extension is capable of combining likelihood and consequence estimates from multiple experts, which incorporates traditional expected value and extreme-event measures of risk. The probability densities of ripple effects are generated via Monte Carlo simulation; hence, providing estimates of the mean and extreme values of economic losses and corresponding levels of sector disruptions. In investing for additional airline security, for example, the “breakeven” level of investment cost should account for the potential consequences associated with both “average” and “worst-case” scenarios. Ultimately, the ranking of the sectors that are most critically affected by a given disruptive event can provide guidance in identifying resource allocation and other risk management strategies to minimize the overall impact on the economy. The methodology is demonstrated through an air transportation sector case study. Key words: {input output analysis}, {decision and risk analysis}, {cost-benefit analysis}, {probability and distribution comparisons}, {simulation and statistical analysis} ____________________________________________________________________________________ 1. Introduction Decision-making processes at any level of a hierarchical system involve management of multiple objectives (costs, benefits, and risks). The US is a large-scale system that is comprised of interdependent sectors such as