Slack in participative budgeting: the joint effect of a truth-inducing pay scheme and risk preferences

Article Abstract:

An incentive difficulty in participative budgeting happens when employees have private data about factors that affect their performance and when the pay plan is budget- or standard-based. Such information can be valuable to the manager in planning and control, if it is communicated accurately by the employee. The employee is motivated to bias communications to facilitate the establishment of a relatively easy standard, therefore promoting slack. Analytical research suggests a truth-inducing pay scale scheme that offers incentives for providing the private information accurately and for providing top performance. The results of an experiment are reported that show that introduction of a truth-inducing scheme actually causes a decrease in slack among risk-neutral subjects, but not among those who are risk-averse.

Usage, Accounting and auditing, Human resource management, Employee motivation, Participatory management, Knowledge, Theory of, Epistemology

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Do cost-based pricing biases persist in laboratory markets?

Article Abstract:

Techniques in management accounting are discussed, focusing on how alternative costing systems can impact pricing decisions. The article argues that cost-based pricing research should consider the market context.

United States, Pricing Policy, Statistical Data Included, Models, Pricing, Cost accounting, Managerial accounting

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