Article | Foundations and Trends in Accounting

Competition and Cost Accounting

by V.G. Narayanan and Michael Smith


The central theme of Competition and Cost Accounting is that strategic considerations may make it desirable for a firm to have divisions and product managers internalize something other than their true costs. In the case of transfer prices, a high transfer price serves as a means of promoting tacit collusion. In the case of product cost measurement, an inferior cost allocation system that just spreads costs evenly may promote tacit collusion.

Keywords: Cost Allocation; Transfer Pricing; Decentralization; Bertrand and Cournot Competition; Cost Accounting;


Narayanan, V.G., and Michael Smith. "Competition and Cost Accounting." Foundations and Trends in Accounting 7, no. 3 (2012): 131–195. (Published: 11 April 2013.)