[This paper provides empirical evidence on a truth-inducing pay scheme widely discussed and analyzed in the incentive contracting literature. An experiment was conducted in which subjects acted as subordinates who performed a production task. Budgets were participatively set under either a truth-inducing or slack-inducing pay scheme and either the presence or absence of a superior-subordinate information asymmetry about subordinate performance capability. Slack was defined as expected performance minus the participatively set budget. The results showed that, when the information asymmetry was absent, slack did not differ significantly between the pay schemes. However, when the information asymmetry was present, slack was significantly lower under the truth-inducing scheme. Similarly, the pay scheme and information asymmetry variables interacted to affect performance.]

Reports on two experiments examining the effects of alternative incentive pay schemes for controlling unit manager behavior in intrafirm resource allocation settings. Resource allocation and the Groves scheme; Operationalization of the resource allocation setting; Cash earning schedule; Unit managers' responses to bonus pay.

When making audit judgments end decisions, an auditor often relies on knowledge or information about how task variables covary. Typically, an auditor generates this information without the aid of a formal covariation model. Thus, the quality of audit judgments and decisions which rely on covariation information may depend on an auditor's ability to judge covariation in a manner that is paramorphic to 8 formal model. This paper reports two experiments examining the rules by which auditors Integrate joint frequency data when making covariation judgments end whether their judgments are affected by context, prior expectations, and amount of auditing experience. A main result was that the subjects generally used date-integration rules that were sensitive to the objective covariation level, but often overstated or understated this level. The effects of context, prior expectations, end amount of auditing experience were generally small.

This paper presents a framework for empirical research on the self-selection and effort effects on worker performance of standard-based employment contracts, along with the results of an experiment that tests some hypotheses derived within the framework. The framework examines how personal and contract attributes (or a worker's perceptions of them) affect the self-selection process and how self-selection and effort are interdependent. The experimental results were consistent with these hypotheses: workers select among alternative employment contracts based on their performance capability, the correlation between performance capability and performance incentives in the contract selected is higher in the presence of a controllability filter, and contract selection can explain effort effects.

Auditors' self-perceptions of their judgment ability may affect how well they learn from experience and how much they rely on decision aids. This study tests the hypothesis that incomplete outcome feedback causes auditors' self-perceived judgment ability to be affected by factors that are not necessarily related to actual judgment ability. The results of an experiment that used professional auditors as subjects making internal control judgments were, for the most part, consistent with this hypothesis.

Auditing, Auditor-Auditee interactions, Misstatements, Strategic behavior