Incentive compatible control using iterative decomposition algorithms

The Dantzig-Wolfe Decomposition Algorithm (DWDA) is viewed as a resource allocation procedure for a multidivisional firm. An evaluation procedure is proposed that provides incentives in equilibrium for the divisional managers to follow the rules of the DWDA even though they are able to "cheat" in a manner that could not be detected. The evaluation procedure is based on a measure that is not simply an index of the division\´s "profit" contribution, but one incorporating the division\´s true opportunity cost to the firm. The evaluation procedure for the DWDA is a specific example of a general procedure for the incentive compatible control of large divisionalized organizations using iterative decomposition algorithms.