Compensatory Transfers in Collective Decision Making

Jerry R. Green is studying mechanisms that can be employed to promote efficient collective decisions while providing justifiable compensation to participants who favor different, less efficient alternatives. This type of decision problem is pervasive in business, government, and economics. For example, it arises whenever different divisions of a firm must cooperate to share overhead expenses; whenever the effectiveness of an advertising campaign depends on emphasizing only some of a firm's products; and, in government, whenever individual jurisdictions are combined-from state interaction at the federal level to schools merged into districts. The theoretical questions addressed by Green's research have a direct bearing on management accounting. Any good method of determining compensatory transfers should be preferred to the many nonproductive strategies that might be invoked. A good method should deliver a consistent result whether a complex, multifaceted decision is tackled all at once or broken down into a set of smaller decisions, each of considerably less import.