Research PaperNo Access

Analysis of Depreciation Methods Based on Cooperative Game Theory — Focusing on the Straight-Line Method

Eiko Arata

https://orcid.org/0000-0001-5813-3912

Faculty of Business and Commerce, Keio University, 2-15-45, Mita, Minato-ku, 1088345 Tokyo, Japan

E-mail Address: eikoara@fbc.keio.ac.jp

Corresponding author.

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Takuhei Shimogawa

https://orcid.org/0009-0008-5744-5816

Faculty of Economics, Musashi University, 1-26-1, Toyotama-kami, Nerima-ku, 1768534 Tokyo, Japan

E-mail Address: smgw@cc.musashi.ac.jp

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, and

Takehiro Inohara

https://orcid.org/0000-0003-4981-0904

Institute for Liberal Arts, Tokyo Institute of Technology, 2-12-1, Ookayama, Meguro-ku, 1528550 Tokyo, Japan

E-mail Address: inohara.t.aa@m.titech.ac.jp

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https://doi.org/10.1142/S0219198924500130Cited by:0 (Source: Crossref)

Abstract

This study develops a model to explain why accounting procedures, also known as Generally Accepted Accounting Principles, are “generally accepted”. For this purpose, we focus on depreciation defined as the rational and systematic allocation of the original cost of an asset over the expected useful life of that asset. We investigate what it means to be “rational” using cooperative game theory. We show that cost allocations determined by the straight-line (SL) method, which is conventionally used worldwide, are elements of the core and that the conditions of the core can be rational in practice. Furthermore, we examine the relationship between the SL method and other solution concepts, such as the Shapley value and the nucleolus. Our next step is to clarify the characteristics besides the core selection of the SL method, those of other depreciation methods used in practice, and the logical relations between these characteristics.

Keywords:

JEL: 22E46, 53C35, 57S20

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