Title: Optimism and Profit-Based Incentives in Cost Stickiness: An Experimental Study
Authors:
- Komang Ayu Krisnadewi
- Noorlailie Soewarno
Departement: Akuntansi
Journal Name: Journal of Management Control
Kinds of Journal: Q2
Keywords: Asymmetric cost behavior, Cost stickiness, Experiment, Optimism, Profit-based incentives
ABSTRACT
This study aims to examine whether managerial optimism and profit-based incentives affect cost behavior asymmetry, especially cost stickiness. Differ from previous literature on cost stickiness, the researchers use an experimental 2 × 2 between within subjects factorial design. This design allows us to use data related to cost management specifically, not just in general term as in studies using archival data from public financial statements. Our study results reaffirm cost stickiness literature. This study focuses on experiments among accounting students who are not knowledgeable about cost behavior asymmetry. Even though our 71 student participants know only the symmetric cost behavior theory, when presented with a scenario related to sales prospects and information on profit-based incentives, the results of this study show otherwise. When participants are more optimistic and profit-based incentives have been achieved, the level of cost stickiness is also higher.
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