Resource Rationing and Organizational Slack in a Two-Period Model

Understanding the role of accounting in intrafirm resource allocation problems' requires understanding its substitutes. If accounting is viewed as information production arising in response to inefficiencies caused by information voids,2 then substitutes for accounting are alternative ways to reduce these inefficiencies. The purpose of this paper is to explore the power of commitment to reduce inefficiencies in a repeated intrafirm resource allocation problem. In this way, we hope to take a step toward understanding commitment as a substitute for accounting. We build a model with inefficiencies due to information voids by assuming an owner of an investment project, who knows only a distri-