What question did this study set out to answer?

The aim is to analyze the economic role of cost allocation in multiagent settings, specifically in relation to performance evaluation and managerial motivation.

March 18, 2026The Accounting Review

Cost Allocation in Multiagent Settings.

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MRMadhav V. RajanCouncil of Independent Colleges

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Implication

This article demonstrates how cost allocation affects performance evaluation in multiple profit centers, highlighting its motivational role.

Key Points

The aim is to analyze the economic role of cost allocation in multiagent settings, specifically in relation to performance evaluation and managerial motivation.
Developed a one-period model featuring two workers with correlated private information about productivity.
Evaluated managerial performance based on divisional profit after allocation of indirect costs.
Compared mechanism design approaches to accounting recommendations and empirical observations.
Indirect cost allocations provide crucial incentives for managers in decentralized settings.
The model shows that without cost allocations, managers might collude and misreport resource productivity.
Implementing cost allocations linked with budgeting leads to a second-best return on fixed investments.

Cite This Study

Madhav V. Rajan (1992) studied this question.

synapsesocial.com/papers/69ba42ae4e9516ffd37a335d https://doi.org/10.2308/tar-9605212923

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Implication

This article demonstrates how cost allocation affects performance evaluation in multiple profit centers, highlighting its motivational role.

Cost Allocation in Multiagent Settings.

Discussion

Member takes

Implication

Key Points

Cite This Study

Cost Allocation in Multiagent Settings.

Discussion

Member takes

Implication

Key Points

Cite This Study

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