A Perspective on Asymmetric Information, Incentives and Intrafirm Resource Allocation

Abstract

The paper Asymmetric Information, Incentives and Intrafirm Resource Allocation, by Harris, Kriebel and Raviv (H.K.R.), was published in the June 1982 issue of Management Science. In this article, written as part of this journal's 50-year anniversary celebration, we highlight the significance of H.K.R.'s paper for research in managerial accounting. We first formulate and solve a continuous version of H.K.R.'s model in order to illustrate the key assumptions and findings of their paper. We then review several strands of the resource allocation literature in managerial accounting that have taken their inspiration, either directly or indirectly, from the work of H.K.R.

Keywords: Intrafirm resource allocation, Managerial Incentives, Asymmetric Information

JEL Classification: D82, M40, M46