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The effects of information framing on decision-making behavior related to resource allocations
Abstract
The purpose of this dissertation is to investigate the effect framing of historical cost information, and opportunity cost information has on resource allocation decisions. The research investigates whether prospect theory provides an explanation of resource allocation decisions involving historical cost information. Prospect theory is a descriptive theory of decision making which posits that individuals evaluate choice alternatives as either gains or losses from a neutral reference point. Historical cost information is generally viewed as irrelevant to resource allocation decisions. However, historical cost information does provide decision makers with the opportunity to frame a decision as either a gain or loss using dollars invested as the reference point. This dissertation also investigated the effect of providing general versus specific opportunity cost information. Previous research has indicated that general statements regarding opportunity cost information may not be sufficient to increase decision makers salience of such costs. The hypotheses were empirically tested by conducting a controlled experiment in which 282 management policy students from 2 universities were asked to respond to a resource allocation case. The case instrument either provided subjects with or without historical cost information, and with general or specific opportunity cost information. The results were consistent with prospect theory when historical cost information was utilized to frame a loss situation, but were inconsistent with prospect theory when historical cost information was utilized to frame a gain situation. The results did not support the hypothesis that specific opportunity cost information would increase the salience of such cost, thereby, rendering alternative investments a more attractive option. The dissertation includes a discussion of the implications of these findings, and opportunities for future research.
Subject Area
Accounting|Management|Business community
Recommended Citation
Devine, Kevin Mark, "The effects of information framing on decision-making behavior related to resource allocations" (1990). ETD collection for University of Nebraska-Lincoln. AAI9022990.
https://digitalcommons.unl.edu/dissertations/AAI9022990