1995 dawes and thaler 1988 as stated above the

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Unformatted text preview: Thus, I test whether auditors choose the Nash level more frequently than the other audit levels. The second alternative, based on the trust/reciprocity literature, predicts that auditors select a relatively higher percentage of trust audits. This outcome is optimal for the auditor only if the manager cooperates. The rationale for the trust alternative is based on previous economic experiments that indicate subjects trust others to reciprocate more than predicted by economic theory in noncooperative games (Berg et al. 1995; Dawes and Thaler 1988). As stated above, the trust/cooperate pair Pareto dominates the Nash equilibrium. The two competing hypotheses for NP/WG setting are stated below. H1 (Nash): Auditors select the Nash audit more frequently than the other audit levels in the NP/WG setting. H1 (Trust): Auditors select the trust audit more frequently than the other audit levels in the NP/WG setting. H2: NP Settings Compared to YP Settings I set up three alternatives, the first based on the Nash prediction, and the secon...
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