Philip Moon

Gambling with the house money in capital expenditure decisions: An experimental analysis

Abstract This paper extends the work of Thaler and Johnson ( Management Science , 1990, 36, no. 6, 643–660) on prior gains and losses in a business context. In support of their results, the current experimental analysis on capital expenditure decisions finds that prior gains shift behaviour towards risk seeking. The results do not, however, offer evidence of prior losses shifting behaviour towards risk aversion.

Sunk cost effects: a test of the importance of context

Abstract This paper presents new experimental results that indicate a significant sunk cost effect for two versions of the same basic decision scenario; namely, individuals are less likely to proceed with a ‘good project’ but more likely to proceed with a ‘poor project’ if they have already made a prior investment. Given that the present results find that the two forms of sunk cost effect identified in the prior literature are not context specific, future research will need to establish the exact nature of the decision making underpinning these effects.

Performance measurement and the use of league tables: some experimental evidence of dysfunctional consequences

Abstract The practice of organisations adopting performance measurement systems that utilise a range of key performance indicators linked to various aspects of corporate strategy has become widespread. At the same time, however, many organisations are developing reporting frameworks that summarise these indicators in the form of a league table, ranking sub-units according to their achievements. The use of such league tables has the capacity to create a form of dysfunctional behaviour as managers focus primarily on their league table positions—the notion of measure fixation. This paper describes a new experiment that seeks to explore this possibility. The results suggest that information concerning the change in league table position leads to an increase in risk-seeking behaviour, particularly where a project proposal creates an opportunity for the managers sub-unit to move to the top of the league table. This is an unintended dysfunctional consequence of using league tables within performance measurement system design.

Some experimental evidence on functional fixation: A research note

Abstract Prior studies have investigated how users of accounting information process information when making decisions. This research examined interference effects such as “data” and “functional fixation”. Specifically, this study investigates whether familiarity with a data set, and a method for its application, prohibits subsequent, alternative uses for that data set. Experimental evidence is presented that suggests the presence of an interference effect.

Opportunity costs for decision making: a teaching resource to illustrate the difficulties of practice

Management accounting texts are generally silent about the difficulties associated with the use of opportunity cost as a decision making aid. This paper highlights, via the use of a simple example, a number of practical difficulties.