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Cost Allocation Revisited: An Optimality Result

Cost Allocation Revisited: An Optimality Result The resource manager of a firm is faced with capacity and pricing decisions with regard to a congestion-prone system such as computer/communication facilities. Difficulties arise since the manager is uninformed of the system demand when the capacity decision is to be made. A game-theoretic model is developed to analyze the effects of different accounting rules on the elicitation of relevant information and ex-post efficiency in acquisition and allocation decisions. The key result is that the cost allocation method (aided by an anonymous reporting scheme) is indeed, as asserted by Zimmerman (Zimmerman, J. 1979. The costs and benefits of cost allocations. Accounting Rev. 54(July) 504–521.), a full-information-efficient rule achieving optimality both in acquisition and allocation decisions. Discussions of the main assumptions underlying this result are provided. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Science INFORMS

Cost Allocation Revisited: An Optimality Result

Management Science , Volume 35 (10): 10 – Oct 1, 1989
11 pages

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References (10)

Publisher
INFORMS
Copyright
Copyright © INFORMS
Subject
Research Article
ISSN
0025-1909
eISSN
1526-5501
DOI
10.1287/mnsc.35.10.1264
Publisher site
See Article on Publisher Site

Abstract

The resource manager of a firm is faced with capacity and pricing decisions with regard to a congestion-prone system such as computer/communication facilities. Difficulties arise since the manager is uninformed of the system demand when the capacity decision is to be made. A game-theoretic model is developed to analyze the effects of different accounting rules on the elicitation of relevant information and ex-post efficiency in acquisition and allocation decisions. The key result is that the cost allocation method (aided by an anonymous reporting scheme) is indeed, as asserted by Zimmerman (Zimmerman, J. 1979. The costs and benefits of cost allocations. Accounting Rev. 54(July) 504–521.), a full-information-efficient rule achieving optimality both in acquisition and allocation decisions. Discussions of the main assumptions underlying this result are provided.

Journal

Management ScienceINFORMS

Published: Oct 1, 1989

Keywords: Keywords : cost accounting ; incentive ; congestion ; asymmetric information

There are no references for this article.