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A note on the impact of the internal organization on the accuracy of the information transmitted within the firm

Author

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  • Alonso-Pauli, Eduard
  • Bru, Lluís

Abstract

We investigate the incentives sales managers have to transmit information on demand conditions to headquarters under different organizational structures, and its subsequent impact on firm performance. When headquarters chooses quantities, their interests are aligned and reliable information is transmitted. When the choice of quantities is delegated to the sales manager, instead, he prefers not to transmit reliable information and as a consequence, headquarters set transfer prices having poor information about demand. We then see that, due to this difference in the quality of the information available to headquarters, the centralized organization frequently has the best performance.

Suggested Citation

  • Alonso-Pauli, Eduard & Bru, Lluís, 2019. "A note on the impact of the internal organization on the accuracy of the information transmitted within the firm," MPRA Paper 97118, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97118
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Organizational structure; transfer pricing; information transmission; internal accounting system.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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