Economic Experiments for the Management Accounting Classroom

Abstract

INTRODUCTION This paper presents three management accounting experiments designed for classroom use. Our approach is similar to that in Boylan (2004) and Schwartz et al. (2005), who describe audit experiments that can be administered without the aid of computers in a relatively short amount of time. Further, the experiments employ simplified settings, which facilitate a focus on first-order effects and ease both implementation and interpretation. However, despite their simplicity, we maintain they can be introduced successfully into courses ranging from introductory management accounting through first-year doctoral seminars. The advantage of using an experimental economics approach to instruction, where students assume decision-making roles, is it allows complex material to be introduced intuitively. Role-playing helps students experience both the economic and non-pecuniary aspects of the settings, without much preparatory work on the tools of economic analysis. This approach can be especially helpful when students have not had a lot of real-world business experience to use as a reference. A further advantage of economic experiments is, due to their enjoyable nature, they often stimulate student interest in the material beyond that achieved by traditional instruction alone. Schwartz et al. (2005) cite evidence on the efficacy of classroom experiments in promoting interest and learning. The experiments described herein address the issue of misaligned goals within an organization, a condition that afflicts almost all organizations to some degree. Naturally, organizations attempt to design mechanisms and protocols to alleviate such goal incongruence; these activities are known as management control. Management control is a broad topic, and our intent is to provide experiments especially suited for management accounting courses. Therefore, the experiments concentrate on the role of information in management control settings. Information voids are often at the heart of management control problems,