Fairness, Ethics and the Effect of Management Accounting on Transaction Costs.

The use of management accounting information in reducing transaction or contracting costs depends both on characteristics of the accounting information and on the preferences of the contracting parties. Much of the existing literature on accounting and contracting assumes a utility function representing preferences for wealth and leisure only. However, a wider range of accounting-related behavior can be explained by using a broader representation of preferences, including fairness and ethics considerations. Areas for further research are proposed. In particular, the value of more accurate product costing may not be completely specified unless alternative-preference-related contracting costs are taken into account.