Deagnostic market feedback attenuates the benefits of ABC for competitive price setting in a heterogeneous market.

Activity-Based Costing (ABC) is intended to assist managers to make better pricing decisions than those taken using traditional volume-based cost methods. The added value of ABC should be assessed against that of signals emanating from the competitive environment in which the firm operates. Prior research has often shown market-based information to be overwhelming, thereby calling into question the wisdom of investing in cost systems to better approximate actual costs. We compare experimentally the pricing decisions of decision makers in a price-competitive duopoly market, characterized by considerable heterogeneity in customer-serving costs. Our results show that the incremental value of ABC depends on the quality of market signals. Decision makers receiving uninformative feedback revert to costing data and ABC outperforms volume-based costing. The presence of a well-informed competitor attenuates but does not completely eliminate the value of ABC.Activity based costing; Managers; Pricing; Decisions; Methods; Value;

Redundancy Scheduling with Locally Stable Compatibility Graphs

Redundancy scheduling is a popular concept to improve performance in parallel-server systems. In the baseline scenario any job can be handled equally well by any server, and is replicated to a fixed number of servers selected uniformly at random. Quite often however, there may be heterogeneity in job characteristics or server capabilities, and jobs can only be replicated to specific servers because of affinity relations or compatibility constraints. In order to capture such situations, we consider a scenario where jobs of various types are replicated to different subsets of servers as prescribed by a general compatibility graph. We exploit a product-form stationary distribution and weak local stability conditions to establish a state space collapse in heavy traffic. In this limiting regime, the parallel-server system with graph-based redundancy scheduling operates as a multi-class single-server system, achieving full resource pooling and exhibiting strong insensitivity to the underlying compatibility constraints.Comment: 28 pages, 4 figure

Drivers of cost system development in hospitals: Results of a survey.

While many hospitals are under pressure to become more cost efficient, new costing systems such as Activity-based costing (ABC) may form a solution. However, the factors that may facilitate (or inhibit) cost system changes towards ABC have not yet been disentangled in a specific hospital context. Via a survey study of hospitals, we discovered that cost system development in hospitals could largely be explained by hospital specific factors. Issues such as the support of the medical parties towards cost system use, the awareness of problems with the existing legal cost system, the way hospitals and physicians arrange reimbursements, should be considered if hospitals refine their cost system. Conversely, ABC-adoption issues that were found to be crucial in other industries are less important. Apparently, installing a cost system requires a different approach in hospital settings. Especially, results suggest that hospital management should not underestimate the interest of the physician in the process of redesigning cost systems.Activity based costing; Cost control; Factors; Hospital context; Hospitals; Industry; Management; Organizational change; Problems; Processes; Studies; Systems;

Competitive Pricing in Markets with different overhead costs: concealment or leakage of information.

Pricing; Markets; Market; Costs; Cost; Information; Accounting; Research;

The benefits of cost system accuracy in a competitive price setting duopoly.

This study reports the results of an experiment to investigate the value of increased cost report accuracy in competitive pricing decisions. Prior work has shown that in more competitive environments, cost system choice matters less since there is opportunity to learn from informative market signals. Our study argues that in a dynamic duopoly, learning from such informative market signals is distorted when decision makers act as market leaders deciding first on prices. Compared to second movers (followers), a leader with a biased cost report continues to prefer his own distorted cost figures over the informative signals emanating from better informed market players. Consequently he realizes lower performance and can be taken advantage of by opponents with access to superior cost data. We conclude that in order to achieve profit leadership, current reputational market leaders have a great interest in improving the accuracy of their own cost report system.Activity based costing; Choice; Competition; Data; Duopoly; Market;

The value of more accurate customer profitability reports: Does cost complexity matter?.

This paper reports experimental evidence on the potential benefits of reporting different levels of customer-related information in a pricing decision context. The paper mainly focuses on the influence of the complexity of the cost environment -measured by the degree of heterogeneity across customers- on the value of more accurate customer profitability systems. Contrary to the findings of Gupta & King (1997) our results indicate that the value of more accurate cost reports increases, as the cost environment becomes more complex. In addition we find that, compared to a situation where decision makers receive only general profit feedback, reports based on traditional costing systems improve the quality of the pricing decision only in a complex cost environment.Activity based costing; Complexity; Cost complexity; Decision; Decision making; Information; Price setting; Pricing; Profitability; Reporting; Systems; Value;