Decentralized capacity management and internal pricing

  title={Decentralized capacity management and internal pricing},
  author={Sunil Dutta and Stefan Reichelstein},
  journal={Review of Accounting Studies},
This paper studies the acquisition and subsequent utilization of production capacity in a multidivisional firm. In a setting where an upstream division provides capacity services for itself and a downstream division, our analysis explores whether the divisions should be structured as investment or profit centers. The choice of responsibility centers is naturally linked to the internal pricing rules for capacity services. As a benchmark, we establish the efficiency of an arrangement in which the… 

Capacity Rights and Full Cost Transfer Pricing

Theoretical properties of full-cost transfer prices in multidivisional firms are examined and divisional managers are responsible for the initial acquisition of productive cap...

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Managerial performance evaluation for capacity investments

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Transfer Pricing in Multinational Corporations: An Integrated Management- and Tax Perspective

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Dynamic Investment Models in Accounting Research

This monograph presents three variants of the neoclassical investment model and characterizes the firm's optimal investment policy, equity value, and the desirable properties of accrual accounting

Internal Pricing: Focusing on Internal Markets

Firms often require the co-ordination of different divisions to achieve company objectives. This cross-functional problem requires managers to co-operate in the interest of the firm and not their own

Internal Pricing: Focusing on Internal Markets

Firms often require the co-ordination of different divisions to achieve company objectives. This cross-functional problem requires managers to co-operate in the interest of the firm and not their own

Cost Based Transfer Pricing

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This paper endeavors to demonstrate that fixed cost allocation can align investment incentives in a multi-period and multi-division setting. In a decentralized firm, a divisional manager can make an

Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments

This paper reviews models of capacity investment under uncertainty in three settings and reviews how to incorporate risk aversion in capacity investment and contrasts hedging strategies involving financial versus operational means.

Capacity Management, Investment, and Hedging: Review and Recent Developments

This article reviews the literature on strategic capacity management concerned with determining the sizes, types, and timing of capacity investments and adjustments under uncertainty. Specific

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A firm with two divisions, each run by a risk‐averse manager, contracts with the two managers to operate their divisions and possibly engage in interdivisional trade. Each division can increase the

Controlling Investment Decisions: Depreciation- and Capital Charges

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Intertemporal Cost Allocation and Investment Decisions

  • W. Rogerson
  • Economics, Business
    Journal of Political Economy
  • 2008
This paper considers the profit‐maximization problem of a firm that must make sunk investments in long‐lived assets to produce output. It is shown that if per‐period accounting income is calculated

Price and Authority in Inter-Profit Center Transactions

Price and authority have traditionally been regarded as alternative social mechanisms for allocating resources. However, actual transactions-whether inter- or intrafirm-can be evaluated in terms of

On manufacturing/marketing incentives

Stereotypically, marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency. Using the principal-agent agency paradigm, which assumes that

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