Skip to main content
SpringerLink
Log in

Behavioral Accounting Experiments in Market and Game Settings

  • Chapter
Experimental Business Research

Abstract

Behavioral accounting research concerns the implications of empirically valid assumptions about human behavior for economic decision-making in relation to accounting systems. Past experiments in the area typically used non-interactive settings. This paper discusses the prospects for re-setting the setting of behavioral accounting experiments to include interactive processes. As background, the first section explains the unique role of behavioral ac­counting research, relative to other areas of accounting research. The second and third sections discuss the prospects for behavioral accounting experiments in market and game settings, respectively. The last section provides conclud­ing remarks.

Critics are our friends; they remind us of our flaws.

Benjamin Franklin

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • American Institute of Certified Public Accountants (1999). Professional Auditing Standards. NY: American Institute of Certified Public Accountants.

    Google Scholar 

  • Arkes, H. R., and C. Blumer (1985). “The Psychology of Sunk Cost.” Organizational Behavior and Human Decision Performance 35, 124–40.

    Article  Google Scholar 

  • Ashton, R. H. (1976). “Cognitive Changes Induced by Accounting Changes: Experimental Evidence on the Functional Fixation Hypothesis.” Journal of Accounting Research 14, 1–17.

    Article  Google Scholar 

  • Ashton, R. H., and A. H. Ashton (1995). Judgment and Decision-Making Research in Accounting and Auditing. Cambridge, UK: Cambridge University Press.

    Book  Google Scholar 

  • Baiman, S. (1982). “Agency Research in Managerial Accounting: A Survey.” Journal of Accounting Literature 1, 154–213.

    Google Scholar 

  • Baiman, S. (1990). “Agency Theory in Managerial Accounting: A Second Look.” Accounting, Organizations and Society 15, 341–71.

    Article  Google Scholar 

  • Baker, G. P. et al. (1988). “Compensation and Incentives: Practice vs. Theory.” Journal of Finance 43, 593–616.

    Article  Google Scholar 

  • Beaver, W. (1998). Financial Reporting: An Accounting Revolution. 3rd ed. Upper Saddle River, NJ: Prentice Hall.

    Google Scholar 

  • Berg, J. et al. (1995). “The Individual versus the Aggregate.” In Judgment and Decision-Making Research in Accounting and Auditing, edited by R. H. Ashton and A. H. Ashton, 102–34. Cambridge, UK: Cambridge University Press.

    Chapter  Google Scholar 

  • Blaug, M. (1992). The Methodology of Economics. 2nd ed. Cambridge, UK: Cambridge University Press.

    Book  Google Scholar 

  • Bloomfield, R. (1995). “Strategic Dependence and Inherent Risk Assessment.” The Accounting Review 70, 71–90.

    Google Scholar 

  • Bloomfield, R. (1997). “Strategic Dependence and the Assessment of Fraud Risk: A Laboratory Study.” The Accounting Review 72, 517–38.

    Google Scholar 

  • Bolton, G. E., and A. Ockenfels (2000). “ERC: A Theory of Equity, Reciprocity, and Competition.” American Economic Review 90, 166–93.

    Article  Google Scholar 

  • Budescu, D. V. et al. (1999). Games and Economic Behavior: Essays in Honor of Amnon Rapoport. Mahwah, NJ: Lawrence Erlbaum Associates.

    Google Scholar 

  • Camerer, C. F. (1987). “Do Biases in Probability Judgment Matter in Markets? Experimental Evidence.” American Economic Review 77, 981–97.

    Google Scholar 

  • Camerer, C. F. (1990). “Behavioral Game Theory.” In Insights in Decision Making: A Tribute to Hillel J. Einhorn, edited by R. M. Hogarth, 311–42. Chicago: University of Chicago Press.

    Google Scholar 

  • Camerer, C. F. (1997). “Progress in Behavioral Game Theory.” Journal of Economic Perspectives 11, 167–88.

    Article  Google Scholar 

  • Camerer, C. F., and T. Ho (1999). “Experience-Weighted Attraction Learning in Normal Form Games.” Econometrica 67, 827–74.

    Article  Google Scholar 

  • Camerer, C. E, and M. Weber (1992). “Recent Developments in Modeling Preferences: Uncertainty and Ambiguity.” Journal of Risk and Uncertainty 5, 325–70.

    Article  Google Scholar 

  • Connolly, T. et al. (2000). Judgment and Decision Making: An Interdisciplinary Reader. 2nd ed. Cambridge, UK: Cambridge University Press.

    Google Scholar 

  • Cook, T., and D. Campbell (1979). Quasi-Experimentation: Design & Analysis Issues for Field Settings. Boston: Houghton Mifflin.

    Google Scholar 

  • Cox, J., and D. Grether (1996). “The Preference Reversal Phenomenon: Response Mode, Markets and Incentives” Economic Theory 34, 381–405.

    Google Scholar 

  • Cyert, R. M., and J. G. March (1963). A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Demski, J. S., and G. A. Feltham (1976). Cost Determination: A Conceptual Approach. Ames, IA: Iowa State University Press.

    Google Scholar 

  • Demski, J. S., and G. A. Feltham (1978). “Economic Incentives in Budgetary Control Systems.” The Accounting Review 53, 336–59.

    Google Scholar 

  • Dorward, N. (1987). The Pricing Decision: Economic Theory and Business Practice. London: Harper & Row.

    Google Scholar 

  • Duh, R., and S. Sunder (1986). “Incentives, Learning and Processing of Information in a Market Environment: An Examination of the Base Rate Fallacy.” In Laboratory Market Research, edited by S. Moriarty, 50–79. Norman, OK: University of Oklahoma.

    Google Scholar 

  • Elster, J. (1998). “A Plea for Mechanisms.” In Social Mechanisms: An Analytical Approach to Social Theory, edited by P. Hedstorm and R. Swedberg, 45–73. Cambridge, UK: Cambridge University Press.

    Chapter  Google Scholar 

  • Erev, I., and A. Roth (1998). “Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria.” American Economic Review 88, 848–81.

    Google Scholar 

  • Fellingham, J., and P. Newman (1985). “Strategic Considerations in Auditing” Accounting Review 60, 639–50.

    Google Scholar 

  • Frederickson, J., and W. Waller (2000). “Contract Framing and Learning in a Principal-Agent Setting.” Manuscript in process, Hong Kong University of Science and Technology.

    Google Scholar 

  • Frisch, D., and J. Baron (1988). “Ambiguity and Rationality.” Journal of Behavioral Decision Making 1, 149–57.

    Article  Google Scholar 

  • Gangully, A. et al. (1994). “The Effects of Biases in Probability Judgments on Market Prices.” Accounting, Organizations and Society 19, 678–700.

    Article  Google Scholar 

  • Gode, D. K., and S. Sunder (1993). “Allocative Efficiency of Markets with Zero Intelligence Traders: Market as a Partial Substitute for Individual Rationality.” Journal of Political Economy 111, 119–37.

    Article  Google Scholar 

  • Govindarajan, V., and R. Anthony (1983). “How Firms Use Cost Data in Price Decisions.” Management Accounting 65, 30–36.

    Google Scholar 

  • Graetz, M. J. et al. (1986). “The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement.” Journal of Law, Economics, and Organization 2, 1–32.

    Google Scholar 

  • Hilton, R. W. et al. (1988). “Product Pricing, Accounting Costs, and Use of Product-Costing Systems.” Accounting Review 53, 195–215.

    Google Scholar 

  • Hoffinan, P. J. (1960). “The Paramorphic Representation of Clinical Judgment.” Psychological Bulletin 57, 116–31.

    Article  Google Scholar 

  • Hogarth, R. M., and M. W. Reder (1986). “Editors’ Comments: Perspectives from Economics and Psychology.” Journal of Business 59, S185–207.

    Article  Google Scholar 

  • Kachelmeier, S. (1996). “Do Cosmetic Reporting Variations Affect Market Behavior? A Laboratory Study of the Accounting Emphasis on Unavoidable Costs.” Review of Accounting Studies 1, 115–40.

    Article  Google Scholar 

  • Kahneman, D., and A. Tversky (1972). “Subjective Probability: A Judgment of Representativeness.” Cognitive Psychology 3, 430–54.

    Article  Google Scholar 

  • Kaplan, R. S., and A. A. Atkinson (1998). Advanced Management Accounting. 3rd ed. Upper Saddle River, NJ: Prentice Hall.

    Google Scholar 

  • Kim, C., and W. Waller (2000). “Ambiguity Aversion and Strategic Interaction in Tax Setting.” Manuscript in process, Hong Kong University of Science & Technology.

    Google Scholar 

  • King, R., and D. Wallin (1995). “Experimental Tests of Disclosure with an Opponent” Journal of Accounting and Economics 19, 139–67.

    Article  Google Scholar 

  • Kinney, W. R. (1975). “A Decision Theory Approach to the Sampling Problem in Auditing.” Journal of Accounting Research 13, 117–32.

    Article  Google Scholar 

  • Kreps, D. M. (1990). Game Theory and Economic Modeling. Oxford, UK: Oxford University Press.

    Book  Google Scholar 

  • Libby, R. (1989). “Experimental Research and the Distinctive Features of Accounting Settings.” In The State of Accounting Research as We Enter the 1990s, edited by T. J. Frecka, 126–47. Urbana, IL: University of Illinois.

    Google Scholar 

  • Lopes, L. (1994). “Psychology and Economics: Perspectives on Risk, Cooperation, and the Marketplace.” Annual Review of Psychology 45, 197–227.

    Article  Google Scholar 

  • Luft, J. (1994). “Bonus and Penalty Incentives: Contract Choice by Employees.” Journal of Accounting and Economics 18, 181–206.

    Article  Google Scholar 

  • Milgrom, S., and J. Roberts (1992). Economics, Organization and Management. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Mukerji, S. (1998). “Ambiguity Aversion and Incompleteness of Contractual Form.” American Economic Review 88, 1207–31.

    Google Scholar 

  • Nagel, R. (1995). “Unraveling in Guessing Games: An Experimental Study.” American Economic Review 85, 1313–26.

    Google Scholar 

  • Nelson, R. R., and S. G. Winter (1982). An Evolutionary Theory of Economic Change. Cambridge, MA: Belknap.

    Google Scholar 

  • Newman, P., and J. Noel (1989). “Error Rates, Detection Rates, and Payoff Functions in Auditing.” Auditing: A Journal of Practice and Theory 8, 50–63.

    Google Scholar 

  • Orchard, L. (2000). “The Effects of Bonus vs. Penalty Incentives in a Laboratory Market Setting.” Manuscript in process, University of Houston.

    Google Scholar 

  • Oxenfeldt, A., and W. Baxter (1961). “Approaches to Pricing: Economist versus Accountant” Business Horizons 3, 77–90.

    Article  Google Scholar 

  • Plott, C. R. (1996). “Rational Individual Behavior in Markets and Social Choice Processes: The Discovered Preference Hypothesis.” In The Rational Foundations of Economic Behavior, edited by K. Arrow et al., 225–50. London: Macmillan.

    Google Scholar 

  • Prendergart, C. (1999). “The Provision of Incentives in Firms.” Journal of Economic Literature 37, 7–63.

    Article  Google Scholar 

  • Rapoport, A. (1999). “Game Theory: Contributions to the Study of Human Cognition.” Cognitive Studies 6, 142–67.

    Google Scholar 

  • Shibano, T (1990). “Assessing Audit Risk from Errors and Irregularities.” Journal ofAccounting Research 28, 110–40.

    Article  Google Scholar 

  • Simon, H. (1986). “Rationality in Psychology and Economics.” Journal of Business 59, S209–24.

    Article  Google Scholar 

  • Slovic, P., and S. Lichtenstein (1983). “Preference Reversals: A Broader Perspective.” American Economic Review 73, 596–605.

    Google Scholar 

  • Smith, V. (1991). “Rational Choice: The Contrast between Economics and Psychology.” Journal of Political Economy 99, 877–97.

    Article  Google Scholar 

  • Smith, V. et al. (1987). “Experimental Economics and Auditing.” Auditing: A Journal of Practice and Theory 7, 71–93.

    Google Scholar 

  • Smith, V., and J. Walker (1993). “Monetary Rewards and Decision Cost in Experimental Economics.” Economic Inquiry 31, 245–61.

    Article  Google Scholar 

  • Swieringa, R. et al. (1979). “Empirical Evidence about the Effects of an Accounting Change on Information Processing.” In Behavioral Experiments in Accounting 2, edited by T. Burns, 225–59. Columbus: Ohio State University.

    Google Scholar 

  • Thaler, R. H. (1997). “Giving Markets a Human Dimension.” The Financial Times, p. 6.

    Google Scholar 

  • Tversky, A., and D. Kahneman (1986). “Rational Choice and the Framing of Decisions.” The Journal of Business 59, S251–78.

    Article  Google Scholar 

  • Tversky, A., and D. Kahneman (1991). “Loss Aversion in Risldess Choice: A Reference-Dependent Model.” Quarterly Journal of Economics 106, 1039–61.

    Article  Google Scholar 

  • Vera-Munoz, S. (1998). “The Effects of Accounting Knowledge and Context on the Omission of Opportunity Costs in Resource Allocation Decisions.” Accounting Review 73, 47–72.

    Google Scholar 

  • Waller, W. S. (1995). “Decision-Making Research in Managerial Accounting: Return to Behavioral-Economics Foundations.” In Judgment and Decision-Making Research in Accounting and Auditing, edited by R. H. Ashton and A. H. Ashton, 29–54. Cambridge, UK: Cambridge University Press.

    Chapter  Google Scholar 

  • Waller, W. S. (2000). “Accounting as Behavioral Constraint: Effects of Alternative Costing Systems on Employee Behavior” Manuscript in process, Hong Kong University of Science & Technology.

    Google Scholar 

  • Waller, W. S. et al. (1999). “Do Cost-Based Pricing Biases Persist in Laboratory Markets?” Accounting, Organizations and Society 24, 717–39.

    Article  Google Scholar 

  • Yim, A. T. (1999). “Reduced Cost of Law Enforcement: A Model with Ambiguity Aversion.” Manuscript in process, Hong Kong University of Science & Technology.

    Google Scholar 

  • Zimbelman, M. F., and W. S. Waller (1999). “An Experimental Investigation of Auditor-Auditee Interaction under Ambiguity.” Journal of Accounting Research 37, 135–55.

    Article  Google Scholar 

  • Zwick, R., and X. Chen (1999). “What Price Fairness? A Bargaining Study.” Management Science 45, 804–23.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Arizona, USA

    William S. Waller

  2. Hong Kong University of Science and Technology, Hong Kong

    William S. Waller

Authors
  1. William S. Waller
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Department of Marketing, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong

    Rami Zwick

  2. Department of Management and Policy, University of Arizona, McClelland Hall 405, 85721, Tucson, AZ, USA

    Amnon Rapoport

Rights and permissions

Reprints and permissions

Copyright information

© 2002 Springer Science+Business Media New York

About this chapter

Cite this chapter

Waller, W.S. (2002). Behavioral Accounting Experiments in Market and Game Settings. In: Zwick, R., Rapoport, A. (eds) Experimental Business Research. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-5196-3_5

Download citation

  • DOI: https://doi.org/10.1007/978-1-4757-5196-3_5

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4419-4910-3

  • Online ISBN: 978-1-4757-5196-3

  • eBook Packages: Springer Book Archive

Publish with us

Policies and ethics

Search

Navigation