Faculty Scholarship 1994 - Present

An Experimental Analysis of Multiple Criteria Capital Budgeting Decisions

This study investigates the differences in multiple criteria capital budgeting decisions when three decision rules are used as decision aids: differential weighting, conjunctive, and disjunctive decision rules. The results of a laboratory experiment show that (1) when using different decision rules, decision makers make significantly different multiple criteria capital budgeting decisions; (2) the linear additive model derived from using the differential weighting decision rule has higher predictive ability than the linear regression model; (3) a linear model has a significantly higher predictive ability than a nonlinear model; (4) the disjunctive and the conjunctive decision rules help subjects make repetitive multiple criteria capital budgeting decisions more consistently; and (5) the subjects do reach consensus on ease of use and reliability of the three decision rules.