The effects of monetary incentives on effort and decision performance: the role of cognitive characteristics
Article Abstract:
A study of the effects of monetary incentives on effort and decision performance focusing on a cognitive characteristic of the decision makers, perceptual differentiation (PD), was conducted using 70 undergraduate students. PD is the ability to perceptually abstract familiar concepts or relationships from a complex setting. The experiment involved tasks applying three decision-making roles used in accounting: conjunction probability, sample size, and sunk cost. The performance of high PDs was better than that of low PDs only in tasks involving the application of conjunction probability, while in tasks involving the application of sample size or sunken costs, no differences were observed. Monetary incentives were associated with higher performance for high PDs in tasks applying conjunction probability and sample size decisions, while for low PDs, monetary incentives did not affect performance for any of the three categories. Results indicate that the effectiveness of monetary incentives may depend on the cognitive capabilities of the decision makers.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1990
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Experimental evidence on taxpayer reporting under uncertainty
Article Abstract:
The complexity of tax law is of concern to policy-making entities such as the IRS because it may lead to uncertainty about taxable income and although many studies have modelled the role of tax accountants in reducing this uncertainty as well as its effects on taxpayer reporting, experimental research has not kept pace. Experiments on the effects of income uncertainty using variable tax rates, penalty rates, uncertainty levels and audit probabilities in the model showed that risk-neutral subjects reported higher levels of income when penalties and audit probability increased, and that uncertainty in these two factors directly influenced income reports.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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