THE EVERLASTING GAP BETWEEN PRICING THEORY AND PRACTICE IN MANAGEMENT ACCOUNTING. The reality gap between management accounting conventional wisdom and empirical evidence has attracted a lot of interest in management accounting research. The conventional wisdom, based on the neoclassical economics framework, postulates that product pricing should follow marginal analysis. Empirical evidence shows that full-cost pricing is the dominant form of pricing behaviour. A first strand in the literature tried to address the gap reconciling full-cost pricing and marginal cost pricing retaining the neoclassical framework. A second strand rejected the neoclassical framework and adopted an institutional economics framework. Neither strand provided conclusive evidence to bridge the gap. In this paper we discuss the nature of the reality gap in the lightof the rationality assumptions underlying neoclassical and institutional economics. We conclude thatfurther research is needed and thatthe reality gap can only be bridged by showing how observed practice(full-cost pricing) may produce an optimal outcome, without imposing profit-maximizinggoals on the firms.

L'eterno divario tra teoria e prassi del pricing nel Management Accounting / Coller, Graziano. - In: MANAGEMENT CONTROL. - ISSN 2239-0391. - 2018:2(2018), pp. 11-33. [10.3280/MACO2018-002002]

L'eterno divario tra teoria e prassi del pricing nel Management Accounting

Coller, Graziano
2018-01-01

Abstract

THE EVERLASTING GAP BETWEEN PRICING THEORY AND PRACTICE IN MANAGEMENT ACCOUNTING. The reality gap between management accounting conventional wisdom and empirical evidence has attracted a lot of interest in management accounting research. The conventional wisdom, based on the neoclassical economics framework, postulates that product pricing should follow marginal analysis. Empirical evidence shows that full-cost pricing is the dominant form of pricing behaviour. A first strand in the literature tried to address the gap reconciling full-cost pricing and marginal cost pricing retaining the neoclassical framework. A second strand rejected the neoclassical framework and adopted an institutional economics framework. Neither strand provided conclusive evidence to bridge the gap. In this paper we discuss the nature of the reality gap in the lightof the rationality assumptions underlying neoclassical and institutional economics. We conclude thatfurther research is needed and thatthe reality gap can only be bridged by showing how observed practice(full-cost pricing) may produce an optimal outcome, without imposing profit-maximizinggoals on the firms.
2018
2
Coller, Graziano
L'eterno divario tra teoria e prassi del pricing nel Management Accounting / Coller, Graziano. - In: MANAGEMENT CONTROL. - ISSN 2239-0391. - 2018:2(2018), pp. 11-33. [10.3280/MACO2018-002002]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/212419
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