96 which reduces the auditors expected payoff to 367

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Unformatted text preview: King and Schwartz (2000) for an example that has risky payoffs; and see Mayhew et al. (2000) for a study that induces risk levels. King—Investigation of Self-Serving Biases in an Auditing Trust Game 271 to cheat and thus increase his expected payoff to 65.96, which reduces the auditor’s expected payoff to 3.67. The auditor has no incentive to change from the trust/cooperate combination. Thus, under this asymmetric payoff structure, auditors benefit from having trustworthy clients. However, the manager has unilateral incentives to violate the auditor’s trust, which creates risks for the auditor. III. EXPERIMENTAL METHOD Subjects are business-school student volunteers, paid based on the outcomes of their choices. Either 10 or 12 subjects participate in each session, half playing the role of the manager and half playing the role of the auditor. I conduct two sessions under each of the four settings, which include the no-puffery/weak group setting (denoted NP/WG); the yes-puffery/weak group setting (YP/WG); the no-puffery/strong group setting (NP/SG)...
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This note was uploaded on 01/27/2014 for the course ACCY 405 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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