Ronald W. Hilton

The Determinants of Cost Information Value: An Illustrative Analysis

Accountants have increasingly recognized their role as evaluators of information. Given an array of alternative information systems, the accountant strives to select the optimal one for the users of the system. This view of accounting has stimulated research into the nature and generation of information. The most comprehensive normative theory of information is information economics, which is designed to facilitate the selection of an optimal information system by explicitly taking into account the decision makers preferences and beliefs about uncertain events. A major concept in information economics is the value of an information system. The purpose of this paper is to identify factors which jointly determine the value of information and to illustrate the role played by some of these factors in a cost-volume-profit (CVP) decision setting. Increased understanding of the role these factors play in determining information value and the relationship of various information system characteristics, as well as environmental and technological factors, to the usefulness of the output from an accounting information system should facilitate decisions about the acquisition and alteration of accounting information systems.

Integrating Normative and Descriptive Theories of Information Processing

In the accounting research of the past decade, considerable emphasis has been devoted to the study of information production and use by decision makers. Most of this research may be characterized as either normative or descriptive. The normative studies have generally relied on information economics (IE) and have concentrated on modeling the selection and use of information systems by rational information evaluators and decision makers, respectively. The descriptive studies have used various deductive and empirical methods in an attempt to develop a positive theory of information production and use. These are often referred to as the human-information-processing (HIP) studies. The normative and descriptive theories are each concerned with the same phenomena, but from different perspectives. Many of the reasons for apparent divergence in the models are due to the lack of explicit representation in one or both models of phenomena that are important attributes of information-processing behavior. Such attributes include information-processing effort, information load and utilization, and information system informativeness. Notwithstanding some differences in the research goals and methods of the two approaches, there is potential benefit in identifying commonalities in the IE and HIP theories. The benefit to IE would be in making the IE model explicitly account for the information-processing limitations of decision makers. The benefit to HIP theory would be the development of precise characterizations of

Risk attitude under two alternative theories of choice under risk

Abstract Anticipated utility theory and prospect theory have been proposed as descriptive models of choice under uncertainty. This paper examines the concept of risk attitude under these two theories, and considers the relationship between risk attitude under von Neumann-Morgenstern expected utility theory and risk attitude under these alternative theories. A risk premium analysis is conducted, and risk premia are partitioned to characterize the complex nature of risk attitude under these theories. Comparative risk aversion across individuals is also considered.

Failure of Blackwell's Theorem under Machina's generalization of expected-utility analysis without the independence axiom

Abstract Considerable evidence suggests that the independence axiom of expected-utility theory is not empirically supported. In response, Machina has generalized expected-utility theory in such a way that the independence axiom is not required. Most of the basic concepts and results of expected-utility theory still hold under Machinas generalization. However, Blackwells Theorem, a fundamental result in information economics, fails to hold under Machinas generalization of expected-utility theory without the independence axiom.

Use Of Accounting Product-Costing Systems In Making Production Decisions

In this paper, we extend results reported in Hilton, Swieringa, and Turner [1988] testing a theory of heuristic decision making proposed by Dickhaut and Lere [1983]. That theory addresses the role of accounting product-costing information in production-quantity decisions.1 Dickhaut and Lere showed that under a plausible heuristic production-decision process, the decision maker should sometimes prefer absorption costing, because it results in a production quantity closer to the quantity determined via a complete, optimizing analysis than the quantity resulting when variable costing is used. Their theory provides the basis for a behavioral theory of the effects on production decisions of accounting product-costing system choice and use. Our results support the Dickhaut/Lere choice heuristic and indicate that our subjects tended to choose the accounting system (variable or absorption costing) predicted by their theory. We obtained stronger evidence in support of the Dickhaut/Lere heuristic in this study than in our earlier study, a result we attribute to three key differences in experimental design: (1) in this study we used a between-subjects design

Risk attitude under random utility

Abstract People often exhibit inconsistencies when confronted with multiple opportunities to make a choice among several alternatives. One type of probabilistic choice model developed to represent such choice behavior is the random expected-utility model. This paper suggests four alternative definitions of risk attitude and comparative risk aversion for individuals whose choice behavior can be represented by a random expected-utility model. The relationships among these alternative definitions are also established.