Game Theory Models in Accounting

Chandra Kanodia ()
Additional contact information
Chandra Kanodia: University of Minnesota

Chapter Chapter 3 in Game Theory and Business Applications, 2014, pp 43-79 from Springer

Abstract: Abstract Accounting from a game-theoretic view posits that accounting data affects, and is affected by, strategic interaction within and across firms. This view holds that the accounting process alters the strategic interaction among agents, by impinging on their incentives and on the contracts they make to constrain their behavior. This chapter considers three main topics. First, the principal-agent paradigm is used to provide insights into the design of performance measures to alleviate moral hazard, including the ex ante control of agents through stochastic monitoring. A second focus is on accounting mechanisms, such as budgeting and transfer pricing, so as to coordinate inter-divisional activities within a firm in the presence of goal conflicts and information asymmetries. These two themes constitute the core of game-theoretic approaches to management accounting. A third focus is on the recent literature concerning auditor hiring and audit pricing in the presence of adverse selection. This work illustrates game- theoretic applications in an area that has traditionally been viewed as “markets” driven.

Keywords: Transfer Price; Participation Constraint; Divisional Manager; Incentive Constraint; Litigation Cost (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-1-4614-7095-3_3

Ordering information: This item can be ordered from
http://www.springer.com/9781461470953

DOI: 10.1007/978-1-4614-7095-3_3

Access Statistics for this chapter

More chapters in International Series in Operations Research & Management Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().