Efficient Manipulation in a Repeated Setting

19 Pages Posted: 7 Jul 2004

See all articles by Joel S. Demski

Joel S. Demski

University of Florida - Fisher School of Accounting

Hans Frimor

University of Southern Denmark - Department of Business and Economics; Aarhus University

David E. M. Sappington

University of Florida - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

We analyze the optimal behavior of an organization when its employees can manipulate the organization's accounting system to their private advantage. We find that the organization may benefit by helping its employees manipulate the system. This help can reduce the employees' private returns from devoting effort to further manipulation of the accounting system, which reduces the cost of motivating the employees to devote their effort to improving the real (rather than the measured) performance of the organization.

JEL Classification: M40, M46, M41, M43

Suggested Citation

Demski, Joel S. and Frimor, Hans and Sappington, David E. M., Efficient Manipulation in a Repeated Setting. Available at SSRN: https://ssrn.com/abstract=548063 or http://dx.doi.org/10.2139/ssrn.548063

Joel S. Demski (Contact Author)

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-392-7597 (Phone)
352-378-1079 (Fax)

Hans Frimor

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Aarhus University ( email )

Department of Economics and Business
Bartholins Allé 10
Aarhus DK-8000
Denmark
+45 8942 2141 (Phone)

David E. M. Sappington

University of Florida - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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