Fabienne Miller

Modeling the Antecedents of Preferences for Incomplete Contracts in Bilateral Trade: An Experimental Investigation

Contracts constitute an important control mechanism. Their design is influenced by the preferences of the contracting parties in addition to firm-level economic transaction costs. This study conducts an experiment to explore the antecedents of preferences or a more incomplete or complete in a trade setting. Results from an experiment indicate that the preference for a complete versus an incomplete contract depends on the perceived riskiness of the incomplete contract, which is influenced by the perceived bargaining power and fairness preferences (namely, distributive and procedural fairness) of the contracting parties. A supplemental analysis of expected trade outcomes confirms that individuals do not choose between incomplete and complete contracts randomly. In other words, we find evidence that suggest that choosing the completeness of a contract is a form of risk-taking and the preference for a more incomplete contract is positively influenced by the perceived power and distributive fairness preference of the contracting parties and negatively influenced by the procedural fairness preferences. Finally, consistent with prior research, we find evidence of self-interested views of fairness and that fairness preferences do not affect expected trade outcomes.

Will texting help student learning? A case study of using mobile devices in university classrooms

The use of Student Response Systems (SRS) has been shown to increase student attendance, participation, and learning. Prevailing systems at universities are typically SRS that require installation of software by the university and purchasing of “clickers”. Thus, the adoption of SRS usually requires a sizable initial investment. Given the diffusion of mobile phones and wide-spread use of mobile technology by students, the possibility of using them as a cost-effective alternative to clickers is attracting more attention. The emergence of audience response systems hosted in the cloud instead of being physically connected to a computer triggered WPI faculty and staff to explore the use of mobile technology as a response tool through Poll Everywhere. First, we present our motivations for adopting this technology (limited clicker supply, desire for open-ended response option, etc.). Second, using our experience in the classroom and findings from extant literature, we make suggestions related to course design to enable faculty to take full advantage of cloud-based SRS. We evaluate whether students concur with our perceived benefits of Poll Everywhere in terms of ease of use and facilitation of learning. We close with discussion and suggestions for future research.

The Effect of Personality Traits and Fairness on Honesty in Managerial Reporting

Abstract Purpose There has been a call for additional managerial accounting research that examines the effect of non-pecuniary preferences (such as those for honesty and fairness) on managerial reporting decisions. Methodology/approach Drawing from trait theory, agency theory, and psychological contracts theory, Kidder (2005) suggests that personality traits and perceived unfairness in the workplace both help predict detrimental workplace behaviors, with perceived fairness affecting the honesty in reporting of some individuals but not others. We test Kidder’s (2005) theory in an experimental setting where participants have opportunity and incentive to report dishonestly. Findings Participants’ honesty preferences and ethical values (idealism and relativism) were measured, and the fairness of the participants’ employment contracts was manipulated. As predicted, higher preferences for honesty are significantly associated with honesty in reporting, suggesting that participants make trade-offs between increasing their own wealth and acting honestly. Additionally, the perceived fairness of compensation interacted with honesty preferences and relativism to affect honesty in reporting. Practical and social implications The implication for practice is that while a small number of employees are likely to consistently behave in honest or self-interested ways, firms may be able to positively influence the behavior of the majority of employees by enacting policies and procedures that contribute to perceptions that compensation is fair. Originality/value of paper These findings contribute to our understanding of non-pecuniary preferences on managerial reporting decisions.

Self-Fulfilling Prophecy? An Examination of Exposure to Agency Theory and Unethical Behavior

Abstract Commentators have claimed that business schools encourage unethical behavior by using economic theory as a basis for education. We examine claims that exposure to agency theory acts as a self-fulfilling prophecy, reducing ethical behavior among business students. We experimentally test whether economics coursework or a manipulated competitive vs. cooperative frame affects measured ethical behavior in simulated decision settings. We measure ethical behavior using established tasks. We also measure ethical recognition to test whether agency theory reduces recognition of ethical issues. Exposure to agency theory in either prior classwork or the experiment increased wealth-increasing unethical behavior. We found no effect on unethical behavior that does not affect wealth. We found no effect of exposure to agency theory on ethical recognition. Usual laboratory experiment limitations apply. Future research can examine why agency theory reduces ethical behavior. Educators ought to consider unintended consequences of the language and assumptions of theories that underlie education. Students may assume descriptions of how people behave as prescriptions for how people ought to behave. This study contributes to the literature on economic education and ethics. We found no prior experimental studies of the effect of economics education on ethical behavior.

Investigation of the Impact of the Massachusetts Health Care Reform on Hospital Costs and Quality of Care

In 2006, the Massachusetts legislature passed a landmark health care reform bill (the Reform) that has served as a model for the national health care reform. By aiming to provide “access to affordable, quality, accountable health care,” the goals of this reform were to reduce the number of uninsured Massachusetts residents while containing the growth of health care costs and improving the quality of health care services. The current paper examines the impact of the Reform on the quality of care in addition to hospital costs simultaneously from a perspective of efficiency analysis. We develop an integer-valued non-radial Russell data envelopment analysis (DEA) model, which is unit variant and calculate the hospitals’ efficiency directly. However, the proposed integer-valued model is non-linear. The current paper thus transforms this model into a parametric integer linear programming. We develop a method to derive its optimal solutions. We then use the new DEA model to calculate and compare the efficiency scores of hospitals in Massachusetts and Connecticut pre- and post-Reform. The analysis shows that the Reform has achieved its cost containment and quality improvement goals at the same time. These analyses provide potentially useful information to hospital regulators and government regulators, especially in light of the national interest on health care legislation.

Evaluating the Effectiveness of Government Mandated Performance Management Systems: A Field Experiment

The public sector has attempted to improve organizational performance by borrowing elements of performance management systems (PMS) from the private sector and imposing those systems on organizations. The health care sector has provided the setting for numerous implementations of such systems aimed at improving quality. However, the effectiveness of those PMS is unclear. We analyze the effectiveness of government mandated PMS by addressing two research questions. First, does the public disclosure of relative performance information (RPI) improve firm performance? Second, is there an incremental effect of mandated pay-for-performance (P4P) plans? We study two such concurrent initiatives in health care to tease out the respective effect of RPI and P4P: the reporting and public disclosure of relative performance measures by acute hospitals (implemented nationwide by CMS, the Centers for Medicare & Medicaid Services) and the Massachusetts P4P plan (implemented by MassHealth).Examination of process measures of quality used in the United States over a six-year period demonstrates the effectiveness of RPI. Yet, the Massachusetts P4P plan does not appear to be associated with incremental performance improvement. These results are consistent with our argument that the P4P plan implemented by MassHealth might have been crowded out by the CMS reporting and disclosure plan and did not provide sufficient motivation to individual employees to improve above and beyond the informational effect of RPI. Findings from this study are especially important as CMS is revamping its payment system and focusing on value-based purchasing.

Modeling the Antecedents of Incomplete Contract Choice in Bilateral Trade: An Experimental Investigation

Whether a contract is complete or incomplete is treated as an exogenous factor in much accounting and economics research, even though the level of completeness of the contract is determined by the negotiating parties. This study conducts an experiment to explore the antecedents of contract choice in a trade setting. Results indicate that the choice of a complete versus an incomplete contract depends on the perceived riskiness of the incomplete contract, which is influenced by the perceived bargaining power and fairness preferences (namely, distributive and procedural fairness) of the contracting parties. A supplemental analysis of expected trade outcomes confirms that individuals do not choose between incomplete and complete contracts randomly. In other words, we find evidence that the choice between an incomplete and a complete contract is the result of a strategic decision influenced by the perceived power and fairness preferences of the contracting parties. Finally, consistent with prior research, we find evidence of self-interested views of fairness and that fairness preferences do not affect expected trade outcomes.

The UCare Business Plan Project: A Managerial Accounting Classroom Teaching Tool

This chapter describes a student team project that involves the creation and delivery of a fundraising event business plan for a nonprofit organization. The project challenges students to become active learners and apply managerial accounting concepts associated with cost behavior, planning, and control in a realistic environment that sensitizes them to the missions of nonprofit organizations. It requires students to research and use real-world operational and financial information in a setting to which they can relate, and develops their understanding of how various business disciplines are integrated. We have used the project in introductory managerial and intermediate cost accounting courses to target specific core competencies identified as critical to a successful accounting career by the American Institute of Certified Public Accountants (AICPA).

Investigation of Information Control and Reputation as Informal Controls Against Hold-Ups

Interfirm relationships can be successful but are also fraught with problems. We study how to encourage one party, herein the seller, to make a cooperative relation-specific investment that will increase the joint surplus. The seller, fearing he will be held up by the buyer, typically refrains from investing or attempts to protect himself with costly protection mechanisms such as vertical integration. We present two informal protection mechanisms that originate with the seller and the buyer, respectively. We propose that information control by the seller and buyer reputation for fairness can separately or simultaneously help reduce the risk that the seller will be worse off after the investment than before and, accordingly, encourage seller investment. To test the related hypotheses, we conduct two experiments and find that information control in the form of aggregated seller investment and production costs reduces the transparency of the seller’s cost information sufficiently to encourage seller investment and to increase offers of self-interested buyers. Additionally, we find that a fair purchasing strategy can signal the buyer’s intention to not appropriate the surplus created by the seller’s investment, thereby also encouraging the seller to invest in the relation-specific asset. Furthermore, we show that this increased investment efficiency is mitigated by the sellers’ expectations about the trade offers buyers will make ex post.

Using Formal and Informal Mechanisms to Limit Opportunism - Review and Classification of the Hold-Up Literature

The hold-up problem has been the source of much investigation by fields ranging from economics to accounting. Despite contractual protection, firms and researchers are still looking for better remedies to hold-ups and searching for ways to encourage firms to make socially optimal specialized investments. In this study, I review and classify analytical and empirical research aimed at finding and testing mitigating mechanisms to hold-ups and I suggest avenues for future research. This research is organized around strategic decision-making with organizational design, trade decisions, and resource allocations. I find that analytical research has focused on formal mitigating mechanisms to hold-ups (i.e., integration, joint ownership, contracts, pricing mechanisms, incentives, and interdependence) and only recently complemented these formal safeguards with informal mechanisms in the form of relational contracting and private information. Empirical research has taken a different approach by focusing overwhelmingly on informal mechanisms. This review also shows that although hold-ups are likely to occur with intra-firm trade and resource allocations, these research streams have not pursued analytical and empirical investigations to the same extent as research on inter-firm trade. As a result, this review not only integrates the findings of the various research streams, but also provides suggestions for future research.