Final answer:
Including multiple years in ROI and RI assessments tends to reduce the incentive for dysfunctional short-term behavior, as it promotes longer-term thinking and sustainable decision-making.
Step-by-step explanation:
False. Including multiple years in the ROI (Return on Investment) and RI (Residual Income) evaluation window does not necessarily increase the incentive to engage in dysfunctional short-term behaviors. In fact, extending the period over which these financial performance measures are assessed can encourage managers to think more long-term and make decisions that are beneficial for the company's sustainable growth. By looking at performance over several years, it discourages the manipulation of short-term results at the expense of long-term health of the company.
Behavioral economists have contributed to understanding that what might seem like irrational behavior in economic decision-making can have deeper underlying reasons. These insights help explain why managers might make seemingly irrational decisions that do not immediately maximize ROI or RI in the short term but are aimed at achieving better results in the long-term.