Participative Budgeting Under Uncertainty: A Decision-Theoretic Approach,

The paper considers the organizational budgeting problem when there are several decision-makers. Whenever there is partial agreement on independence, statistical and value-wise, among the activities under consideration, a basis exists for a considerable reduction and division of labor in the budgeting effort. Using a decision-theoretic approach, a scheme is proposed that offers the opportunity to utilize the organizations best talents in each area, without running much risk that cheating will appear worthwhile to any individual. Essentially, required values and likelihoods are obtained from selected specialists while all calculations and certain cheating-preventive random choices are left to a computer. In a special case, it is proved that every cheating strategy has a positive probability of backfiring. The method also facilitates the determination of the size of the total budget that should be adopted. Author