The effect of cost behavior perception and professional experience on cost prediction: An Explanation of Brunswick's lens model

One of the most important areas in accounting management is judgment and decision making on costs prediction. This research investigates the effect of cost behavior perception and professional experience of individuals on judgment and decision making about cost prediction. In particular, we conduct a laboratory experiment with a 2×4 design mixing a within-subjects condition with a between-subjects condition. The independent variables are cost behavior (linear, sticky. anti-sticky, semi-sticky) and professional experience. The subjects of this research are classified into two groups of professional (managers) and students. Also, dependent variables of research are as follows: 1) quality or accuracy of cost prediction (mean absolute error of the individual`s predictions) and 2) Brunswick`s lens model indices (Matching, consistency and achievement).The results show that subjects are more likely to recognize symmetric (linear) cost behavior (traditional model) rather than asymmetry cost behavior (i.e. sticky and anti-sticky) and there is no difference between the professional and the students in terms of understanding these relationships. The results also show that the overreaction (or underreaction) to resource adjustment decisions when revenues are decreased is not rooted in the pre-determined mindset of individuals as a cognitive bias.