Resource title

Inter-temporal fixed cost allocation and investment incentives

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Resource description

This paper implements a fixed cost allocation mechanism in a single-agent setting, when the manager's performance measure is residual income. The author emphasizes inter-temporal allocation of investment expenditures, and derives optimal depreciation schedules that can induce first-best investment decisions when the manager's discount rate is not observable.

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Resource language

en

Resource content type

application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2003/2003-36.pdf

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Copyright INSEAD. All rights reserved