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What does that "influence cost" meas?

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Latest post Fri, Feb 20 2009 8:07 PM by Anonymous. 7 replies.
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Pdk001  +  213922 Mon, 10 Apr 06 02:49 AM
hi all
i have a question about "influence cost" meaning
it comes from economic

thanks in advance
Pdk001
Joined on Sat, Nov 19 2005
seoul, korea
Junior Member 95
i always appreciate you that help me out
Jay_zzz0, 3 yr 226 days ago
Hmm ... I only remember 'opportunity cost'.  Which chapter is this term in? 
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FloridaMan  +  262214 Sun, 03 Sep 06 05:05 PM
I have not heard of this term either (And I have a degree in economics) but it could be in reference to the cost of marketing and gaining customers.
FloridaMan
Joined on Sun, Sep 3 2006
Florida - U.S.
New Member 18
Actually, I know American English.
Clive  +  262809 Tue, 05 Sep 06 05:47 AM

Hi,

If you use google to search for 'Complementarity, Influence Cost, and Equity', you will find a paper on this topic written by Eva M. Meyersson Milgrom of Stanford University.

She seems to use the term 'influence costs' to refer to the costs incurred inside an organization when you change that organization, ie the costs of 'resistance to change'. Such costs reduce productivity.

Best wishes, Clive
Clive
Joined on Thu, Oct 28 2004
Canada
Veteran Member 29,581
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Anonymous, 2 yr 167 days ago
YES! That's it! Spot on!
Anonymous, 1 yr 336 days ago

Heres an example of influence costs, when a company such as an auto maker decides to make more than just cars, say for example, brake pads.  There will be an internal agent in the company responsible for producing those brake pads, a manager so to speak.  This manager will have to adhere to goals established by the board of directors in the company, but will not be directly supervised in getting to that goal- that is agent cost.  Influence cost occurs when the company builds those brake pads "in-house" and a manager is responsible for allocating funds to produce those brake pads.  Well, to put it simply, there might be some reasons other than efficiency and company profit which might influence that manager to allocate more money to one area of that production over another.  That is considered costly in a company, or the cost of influence= influence cost

hope that helps

Anonymous, 1 yr 129 days ago
Milgrom and Roberts came up with this term. This is briefly how they describe it:

If capital is scarce, then when resources are allocaed to one devision or department, fewer recources are available to be allocated to others. Managers will attempt to influence this allocation. Influence costs include not only the the direct costs of influence activities(e.g., time wasted on going to headquarters, excetera), they also include the costs of bad decisions that arise from influence activities.

Large, vertically integrated firms are more likely to have these costs than smaal firms.
Anonymous, 274 days ago

influence costs are related to the `internal capital markets` withing the company to allocate financial and human resources. If internal capital is scarce, then when resources are allocated to one division, fewer resources are available to be allocated to others. Managers would attempt to influence this allocation.

Influence costs include not only the direct costs of influence activities (the time wasted when a division manager lobbies central management to overturn a decision that is unforable to his division), they also include the costs of bad decisions, that arise from influence activities.A large vertically integrated company may be prone of influence costs.

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