We examine the realism of the assumption of self-interested opportunism in agency theory. We place subjects into manager/producer pairs and set parameters so that the producer extracts the highest share of residual earnings from the manager by setting the budget at zero (100% slack) and...

Although neoclassical economic theory predicts that fixed cost magnitude and fixed cost reporting format will not influence short-term pricing decisions, these factors systematically affected pricing decisions in a duopoly experiment. Increasing fixed cost magnitude (a pure sunk cost in this...

Although neoclassical economic theory predicts that fixed cost magnitude and fixed cost reporting format will not influence short-term pricing decisions, these factors systematically affected pricing decisions in a duopoly experiment. Increasing fixed cost magnitude (a pure sunk cost in this...

Running a contest can help managers elicit creative ideas from employees by providing employees with incentives to develop and share ideas that will help the firm. Little is known, however, about how contest design affects the outcomes of subjectively evaluated creativity-based contests. We...

This study experimentally examines how the generosity of an incentive contract offered by an experimental firm to a pair of employees and a feedback system that provides information on individual employee cooperativeness affect the sustainability of cooperation. Both contract generosity and the...

This paper analyzes whether the new business segment reporting disclosure rules, SFAS 131, will actually provide capital market participants with more predictive ability than the previous rules. For this we conduct three experiments. Two experiments with advanced accounting students as subjects,...

Contract audits aimed at reducing information asymmetry and transaction costs are frequently used in imperfect markets such as defense procurement. This contradicts predictions from standard economic theory. We conduct a laboratory experiment to investigate this paradox. Our laboratory setup...

Contract audits aimed at reducing information asymmetry and transaction costs are frequently used in imperfect markets such as defense procurement. This contradicts predictions from standard economic theory. We conduct a laboratory experiment to investigate this paradox. Our laboratory setup...

Timely voluntary disclosure of information by companies sometimes results in erroneous disclosure that must be later retracted (i.e., withdrawn) and/or corrected (i.e., replaced with a corrected disclosure). Although such retractions and corrections appear to be relatively easy and costless ways...

At present, ways to improve audit quality and auditing decisions are intensively being discussed worldwide by standard setters and researchers. Audit quality is mainly influenced by two factors the requirements of standard setters and the professional judgment of auditors. Especially the...