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

Abstract

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;