Beating the base-rate fallacy: an experimental approach on the effectiveness of different information presentation formats

Christine Ohlert () and Barbara Weißenberger ()

Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, 2015, vol. 26, issue 1, 80 pages

Abstract: Cognitive biases such as the base-rate fallacy are well known in theory, but until recently there exists only limited research how to cope with those biases in managerial decision-making. Hence, the aim of our study is to examine how management accountants should prepare information in order to reduce the phenomenon of base-rate neglect in probability judgments to guide rational managerial decision-making. To address this research question, we use an experimental design. Empirical evidence suggests that a visual-based information format, especially in comparison to a tabular representation, significantly reduces the fallacy of neglecting base-rates. In addition, we integrate user’s cognitive style and other personal characteristics as possible factors influencing the base-rate fallacy. Underlying mechanism and individual differences are discussed. Based on our findings, we offer advice to management accountants and guidance for future research directions. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Base-rate fallacy; Debiasing; Behavioral accounting; Management reporting; Information presentation; Visualization; Individual differences; Cognitive style; M10; M40 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s00187-015-0205-2

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