Semiar 17 - Analysis of Conflict

Financial Accounting Theory (5th Edition)

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Matt Steger Seminar 17 – An Analysis of Conflict October 22, 2009 In our current reading from Scott’s text, we are introduced to game theory and several primitive game theory models which help to provide insight into its mechanisms relating to the decision-making process and perspective on how different variables can effect and change the outcome of a decision. Scott begins his discussion by explaining how conflict plays a pivotal role in game theory by providing a premise through which outcomes and decisions can be observed. He expands on this idea by writing “Game theory attempts to model and predict the outcome of conflict between rational individuals” (304). The overview of the chapter provides a few key reasons for why game theory is important to accounting. Among them are that “we can better understand how investors, creditors, managers, and others rationally deal with the economic consequences of financial reporting” (305). Scott suggests that game theory helps us to see this when the contract implications of changes in accounting standards are realized; many contracts are directly tied into entity financial statements and any standard change which upsets such a balance is a potential cause of the conflict which is the foundation of game theory modeling. Game theory, as its name suggests, involves players who are essentially at odds with one another in the
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This document was uploaded on 04/06/2010.

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