Article | Foundations and Trends in Accounting | April 2013

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," Tranfer 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 (April 2013).