The incremental benefits of changes in the timeliness of information

The managers of all purposeful organizations rely on historical information as an aid to decision making. Information enables managers to formulate expectations about the future. Less timely information is generally inferior because the manager's expectations will contain greater error; and the operating results obtained may therefore be less satisfactory. The timeliness of information often can be improved by incurring incremental systems costs. However, the degree to which such improvements will produce benefits is uncertain. This research uses modeling to explore the relationship between information timeliness and the benefits derived by implementing optimal decisions based upon the information. The most significant finding is that the shape of this relationship is dependent upon the scope of the action set available to the decision maker. If a continuous range of options is available (such as a pricing decision), then the relationship is linear. If only a few discrete options are present (as in linear programming) the relationship is more complex but describable. The decision maker is therefore found to be in a position to offer guidance to the systems designer which will facilitate enhancement of the benefit/cost characteristics of the organization's information resource.