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...

Many accounting textbooks state that the opportunity cost of idle fixed assets is zero. A few exceptions refer to repair, overhaul, employee vacation and congestion, giving rise to positive opportunity cost. We show that in important and frequently encountered situations, idled assets have...

Many accounting textbooks state that the opportunity cost of idle fixed assets is zero. A few exceptions may refer to factors such as repair and overhaul, employee vacation and congestion that give rise to strictly positive opportunity cost. We show that in important and frequently encountered...

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...

We examine the value of assigning costs of capacity resources to products for capacity planning. It is often argued that a product's full cost, which includes such assignments, is a measure of its long-run manufacturing cost. Hence, full cost is viewed as an appropriate basis for deciding...

Using theoretical analysis and simulation experiments, we examine the usefulness of full costs for product pricing. We show that full costs are economically sufficient for pricing when a decision-maker (DM) jointly solves the capacity planning and pricing problems, and has enough discretion in...

Using an agency theory framework, we examine the effect of managerial overconfidence on the interaction between planning and control problems. We consider a typical setting in which a manager makes an investment decision involving project selection and a production decision to implement the...

Screening talent to appropriately assign tasks among agents is an important organizational decision. In this paper, we compare the efficacies of absolute and relative performance evaluation systems in identifying agent talent when information asymmetry is present. We identify conditions under...

Using a setting in which an employer seeks information about talent in order to achieve a proper match between talent levels and tasks, we provide a comparative analysis of two performance evaluation systems widely used in practice ― an absolute performance evaluation system (APE) and a...