Repeated Task Performance and Numeric Outcome Feedback in a Complex Decision Environment: Working Paper Series--10-09

Many business scenarios involve similar decisions over repeated iterations. Often, decision-makers are provided with numeric feedback between iterations. We examine the effect of numeric outcome feedback in a complex accounting task. Prior psychology research indicates that outcome feedback is largely ineffective (or even counter-effective) at improving performance in complex tasks (see Balzer et al., 1989; Todd and Hammond, 1965; Hammond and Summers, 1972; Hammond et al., 1973). However, Libby (1981) speculates that these results may be caused by the tendency of psychology research to use abstract tasks with no real-life application, thus making the learning process more difficult. Consistent with this speculation, we find that OFB can, in fact, improve performance in a complex numeric-feedback task which is placed in a more-meaningful learning environment. We find that repetition (without OFB) does not improve performance in this environment. We discuss the importance of OFB, rather than the intuitively appealing step-by-step feedback (Bonner and Walker 1994), in a world characterized by time constraints and easy information access

Experimental evidence of a sunk–cost paradox: a study of pricing behavior in Bertrand–Edgeworth duopoly

A well–known implication of microeconomic theory is that sunk costs should have no effect on decision making. We test this hypothesis with a human–subjects experiment. Students recruited from graduate business courses, with an average of over six years of work experience, played the role of firms in a price– setting duopoly game in which both firms had identical capacity constraints and costs, including a sunk cost that varied across experimental sessions over six different values. We found, contrary to the prediction of microeconomic theory, that subjects ’ pricing decisions showed sizeable differences across treatments. The effect of the sunk cost was nonlinear: as it increased from low to medium levels, average prices decreased, but as it increased from medium to high levels, average prices increased. Cost–based pricing predicts the latter effect, but not the former

Intra-Institutional Factors That Influence Accounting Research Productivity

This paper examines actionable factors that influence research output of accounting faculty.  Using a regression model, we investigate how internally controllable factors influence both the quantity and quality of research productivity.  We document and quantify how reduced teaching loads, greater research support, longer probationary periods, and proper allocations of time by faculty consistently lead to significantly increased research output.  Depending on the research output metric examined, we also find that fewer teaching preparations, more outside consulting and mentor relationships result in higher output. Our results update and complement the past survey and empirical findings of Cargile and Bublitz (1986), Chow and Harrison (1998) and Fogarty and Ruhl (1997)

A comparison of auditor and non-auditor performance evaluations: Are accountants harsh critics?

Purpose – The purpose of this paper is to investigate whether audit professionals exhibit greater performance evaluation bias compared to non-accounting professionals. Design/methodology/approach – Both audit and non-accounting professional subjects read a case study and evaluated the performance of a hypothetical subordinate. Two factors were manipulated the subordinate's work performance history and the subordinate's current performance relative to a budget. Findings – It was found that reputation bias and hindsight bias are prevalent in both professional groups. The groups exhibit no difference with respect to reputation bias; however, it was found that public accountants exhibit significantly greater hindsight bias relative to non-accounting professionals. Practical implications – The paper provides evidence that accountants are relatively harsh critics of subordinate performance. Importantly, the paper investigates accountant vs non-accountant comparisons where subordinates' ex ante decisions are consistent with superiors' ex ante guidance (i.e. ex post performance being either favorable vs unfavorable is purely outcome-effect driven). If the findings are robust, this study provides a fundamental reason why employee retention in public accounting is relatively low. Originality/value – This paper is the first to make direct comparisons of performance evaluation bias effects between auditors and similarly experienced working professions.Accountants, Auditors, Bias, Performance appraisal