02 Economics_of_ATG_ Info - 02 ObjectivesandEconomicsof

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Objectives and Economics of  Objectives and Economics of  Accounting Information Accounting Information Accountancy 301 Spring 2011 Flora Zhou 02
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Today Today ’s agenda ’s agenda • Group formation • Group activity- Akerlof’s Market • Uses of accounting information • Economics of accounting information • Managers’ influence on accounting  information • Objectives of accounting information
Background image of page 2
Group exercise Group exercise  -- Akerlof  -- Akerlof ’s Market for “Lemon” ’s Market for “Lemon” There are 10 used cars. The true values of these  cars range from 1K (lemon), 2K, …, to 10K  (peach).  Cars look identical from outside and buyers do not  have technical expertise to tell which car is which. The seller knows his used cars’ true values. But buyers only know that each car has an equal  chance (10%) of being a lemon, peach, etc.  All sales are  final  without recourse – the seller will  go to Mars and live happily ever after while buyers  are stuck on earth.  • Sellers’ goal is to sell the car above its true value. • Buyers’ reservation price is 500 dollars above the  true value.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Discussion questions Discussion questions • What cause Akerlof’s market to break  down? • What happens if both parties know the cars’  true value? • What are the remedies for Akerlof’s  market? • How does it relate to accounting?
Background image of page 4
What cause Akerlof What cause Akerlof ’s market to  ’s market to  break down? break down?
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What if both parties know the true  What if both parties know the true  value? value?
Background image of page 6
What are remedies for Akerlof What are remedies for Akerlof ’s  ’s  market? market?
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Firm as a nexus of contracts Firm as a nexus of contracts Managers Shareholders Creditors Employees Firm Suppliers Government Auditors Customers
Background image of page 8
Information asymmetry • What is it? • What are the potential consequences of 
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/08/2011 for the course ACCY 301 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

Page1 / 22

02 Economics_of_ATG_ Info - 02 ObjectivesandEconomicsof

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online