Managers often have discretion in allocating organisation expenditure between costs that are ‘productive’ and ‘unproductive’ for that organisation. For example, productive expenditure might involve...

Managers often have discretion in allocating organisation expenditure between costs that are ‘productive’ and ‘unproductive’ for that organisation. For example, productive expenditure might involve investing in R&D for new product development, while unproductive expenditure might involve buying new furniture for managers’ offices. ‘X-inefficiency’ is the idea that managers may allocate too much expenditure to unproductive uses. How is the idea of Xinefficiency related to an organisation’s production efficiency? Can you think of examples of X-inefficiency?