A two-date rational expectations model is analyzed. At the first date, traders can privately acquire a costly signal that provides imperfect information about a public report that will be issued at the second date. Equilibrium characterizations are provided for the fraction of traders that become informed and the informativeness of the first-date price, as well as the price change variance and the expected trading volume at the second date. Comparative statics identify how the above variables are influenced by changes in the information content of the public report, and in particular how market phenomena at the public release date are influenced by endogenous prior information acquisition and trading in response to the forthcoming public release.

[The purpose of this paper is to examine controllability: the notion a manager should be evaluated based on that which she or he controls. We embed the managerial evaluation problem in a principal-agent setting and ask whether the optimal agency solution bears any logical relation to a casual definition of controllability. It does not. More to the point, the agency framework compels us to look at information content. This information content perspective, upon reflection, agrees with our intuition, with our anecdotal impressions of practice, and with the dictates of the principal-agent model. Moreover, there is a well-defined relation between information content and a notion of control. Thus, the information content perspective may be thought of as offering a precise definition of controllability.]

Presents an overview on accounting for defense contracts. Opportunities for accounting scholarship in the defense industry; Regulation in the industry; Possibility of efficient behavior in the industry; Contracting frictions; Product costing's impact on factor choice incentives.

This article explores conventional questions of why and how budgets should be employed for motivation purposes in an economic setting. The authors focus on the types of employment contracts that are associated with equilibrium allocations in the labor market. Market incompleteness is a necessary condition for use of budgets in the employment contract. Beyond this, issues of controllability, management by exception, and tightness of standards are observed to depend on the contracting environment faced by the individual agents.

The article discusses forecast evaluation in accounting. Accounting data are often used in the development of forecasts and accountants are often called on to make forecasts. Development of a variable overhead rate per direct labor hour may, for example, be viewed as development of a forecast--whether it is used in a standard cost system, in a budget, or in a product mix decision. Similarly, establishment of a depreciation policy requires a forecast of service life. Furthermore, the ability to forecast some specific outcome has been offered as a criterion for selection among accounting alternatives. But, whatever its ultimate purpose, development of a forecast constitutes a decision--a conscious choice among alternatives. The concern in this paper is limited to this decision aspect of forecasting. In particular, in the first section it is demonstrated that selection among forecast alternatives is a subset of the accountant's general problem of selection among information alternatives. Following this, characterization is done of prevailing methods of selecting among forecast alternatives as a simplification of the basic information choice problem. The paper then concludes with two illustrative simulations.

The article discusses the nature of decision models and information evaluation models. The first section presents a general framework, or model, for information evaluation. The second examines the nature of the operational model that would be constructed in order to apply the general framework in a specific setting. The information evaluation process is viewed in cost-benefit terms; and the cost-benefit, or value, calculation is developed from the point of view of an individual who decides what information to supply. Different signals may result in different decisions, and, therefore, the information evaluator must develop a conditional probability distribution over the future events for each possible signal. Decision models seldom represent as controllable variables all actions that must be taken. Most mathematical models do not attempt to include detailed predictions of individual events. One simplified and well-known method for selecting information systems is to base the selection on personal opinion. Some insights that can be developed by such an exploration were then related to information choice issues and information research methods.

Reviews the book "Mathematical Applications in Accounting," by A. Wayne Corcoran.

The familiar decision analysis setting in accounting, such as a cost‐volume‐profit analysis setting, is modeled as arising in a “larger” context in which subsequent choice is also contemplated. We then ask when this “larger” context decomposes in a manner such that the immediate problem of interest can be modeled as an expected utility maximization problem that is completely divorced from the subsequent choice problem. Outcome and taste independence conditions are the key ingredients in being able to model the immediate problem as having no link whatever to its successor. Résumé. Le contexte dans lequel les techniques d'analyse de décision comme par exemple l'analyse coĉt‐volume‐profit est utilisée est un cadre d'un modèle élargi qui tient compte du choix subséquent. On se demande en quelles circonstances ce contexte élargi peut‐il se décomposer de façon telle que le problème d'intérêt immédiat en soit un de maximisation complètement séparé du problème du choix subséquent. Le résultat et des conditions d'indépendance de préférence sont les ingrédients clés pour modeler le problème immédiat comme n'ayant aucun lien avec son successeur.