Granularity, Time and Control of Economic Resources

27 Pages Posted: 13 Apr 1999

See all articles by Ramji Balakrishnan

Ramji Balakrishnan

University of Iowa - Department of Accounting

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Shiva Sivaramakrishnan

Rice University

Date Written: February 1999

Abstract

Opportunity cost is a central concept in decision making. It is difficult to measure because it is the value associated with opportunities foregone. In this paper, we characterize three time-based dimensions of resources to help understand and estimate opportunity costs. These dimensions capture the intrinsic lumpiness of resources with respect to their acquisition (acquisition granularity), the extent to which they retain their usefulness over time (expiration granularity), and the extent to which the decision-maker has control over the consumption of these resources (consumption granularity). We illustrate how these concepts may be used in decision making. We show how the granularity framework points to a non-linear cost assignment procedure using multiple cost drivers for some resources.

JEL Classification: M40, M46

Suggested Citation

Balakrishnan, Ramji and Sunder, Shyam and Sivaramakrishnan, Shiva, Granularity, Time and Control of Economic Resources (February 1999). Yale SOM Working Paper No. AC-03. Available at SSRN: https://ssrn.com/abstract=159548 or http://dx.doi.org/10.2139/ssrn.159548

Ramji Balakrishnan

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0958 (Phone)
319-335-1956 (Fax)

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Shiva Sivaramakrishnan (Contact Author)

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

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