The Evaluation and Choice of Internal Information Systems Within a Multiperson World

In choosing a firm's internal information system,' the accountant usually simplifies his choice problem by ignoring any indirect effects his choice may have on the actions chosen by the firm's competitors. The accountant ignores these indirect effects on the assumption that the choice of a strictly internal information system for a firm should have no effects, direct or indirect, on the actions chosen by the firm's competitors. Indeed, this assumption is implicitly formalized in much of the information economics literature, which deals only with information system choice within a oneperson world. (See Marschak [7], Feltham [4], Feltham and Demski [5].) This paper addresses the issues of the valuation and choice of internal information systems within a multifirm (or multiperson) world.2 I will show that, under appropriate conditions, an individual's choice of a strictly internal information system can affect his competitors' chosen actions, and that ignoring these effects can lead to an incorrect valuation, and hence choice, of an internal information system. In particular, I will show that in a specific multiperson noncooperative game' setting, individual A