Designing Information Systems to Optimize the Accuracy-Timeliness Tradeoff

Abstract

It is well known, of course, that the assessment of this month's economic activity will improve with the passage of time. The same situation exists for many of the inputs to managerial and strategic decision processes. Information regarding some situation or activity at a fixed point in time becomes better with the passage of time. However, as a consequence of the dynamic nature of many environments, the information also becomes less relevant over time. This balance between using current but inaccurate information or accurate but outdated information we call the accuracy-timeliness tradeoff. Through analysis of a generic family of environments, procedures are suggested for reducing the negative consequences of this tradeoff. In many of these situations, rather general knowledge concerning relative weights and shapes of functions is sufficient to determine optimizing strategies.