A Peek Behind the Curtain that Conceals Self-Dealing

43 Pages Posted: 2 Jun 2014

See all articles by Gregory B. Waymire

Gregory B. Waymire

Emory University - Department of Accounting

Radhika Lunawat

University of California, Irvine - Accounting Area

Baohua Xin

University of Toronto - Rotman School of Management

Date Written: May 31, 2014

Abstract

Because successful self-dealing cannot be observed in naturally occurring data, we conduct an experiment where self-dealing emerges endogenously along with concealment strategies. We show that subjects can profitably self-deal while fashioning complex strategies that include opacity-preserving resource divisions and misleading direct communication that can build false trust in partners that can be later exploited. These strategies also entail profit skimming that has the paradoxical effect of reducing private gains from self-dealing. Ultimately, self-dealing occurs frequently in economies that generate larger social gains from exchange than economies where hard information provision leads to fully transparent resource allocation.

Keywords: self dealing, deception

JEL Classification: C72, C91, D82, M41

Suggested Citation

Waymire, Gregory B. and Lunawat, Radhika and Xin, Baohua, A Peek Behind the Curtain that Conceals Self-Dealing (May 31, 2014). Rotman School of Management Working Paper No. 2444129. Available at SSRN: https://ssrn.com/abstract=2444129 or http://dx.doi.org/10.2139/ssrn.2444129

Gregory B. Waymire (Contact Author)

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
404-727-6589 (Phone)
404-727-6313 (Fax)

Radhika Lunawat

University of California, Irvine - Accounting Area ( email )

Irvine, CA 92697-3125
United States

Baohua Xin

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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