Robert E. Verrecchia, The Use of Mathematical Models in Financial Accounting, Journal of Accounting Research, Vol. 20, Supplement: Studies on Current Research Methodologies in Accounting: A Critical Evaluation (1982), pp. 1-42

[We present a model of information acquisition in a competitive market in which traders can learn both from costly (and diverse) private enquiry and price, which costlessly (but partially) reveals the total amount of information known to all traders. Our major purpose is to show that an equilibrium exists in such a market: that is, there exists a rational expectations competitive equilibrium in which the amount of costly diverse information each trader acquires is endogenously determined. From this result we investigate the change in the informativeness of price relative to changes in the level of noise, the cost of acquiring information, and the distribution of traders' risk preferences.]

Since cost allocation has been widely viewed as an arbitrary process, the theory of choice among allocation alternatives is little advanced. This paper illustrates some practical problems that result in the absence of well-established guidelines for choosing among cost allocation alternatives. Specifically, two appeals before the Armed Services Board of Contracts Appeals involving the issue of cost allocation are discussed and analyzed.