A Sensitivity Analysis of Variable-Base Budgeting
In variable-base budgeting an organization's resources are partitioned into two categories, those allocated to decision making and those allocated to implementation, and both sets of resources are further subdivided as necessary---between departments, across time stages, etc. The purpose of the budgeting effort is to maximize an expected return, which depends on that part of the organization's resources allocated to implementation, net of risk, which is reduced by allocating resources to decision making. In a previous paper it was shown that zero-base budgeting, in which substantial resources are allocated to decision making, is optimal only under certain conditions, one of which is that management resources must be costless. Since these conditions seldom obtain in the real world, it seems reasonable to examine the sensitivity of the risk/return performance of a zero-base strategy with respect to deviations from the conditions for which that strategy is optimal. The principal conclusion of the research reported here is that the mesa phenomenon---the relative insensitivity of the outcome of resource allocation decisions in the neighborhood of the optimum---applies to the allocation of management resources as well.
Volume (Year): 29 (1983)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: |
Web page: http://www.informs.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:29:y:1983:i:1:p:65-76. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.