Resolution of Information Asymmetry in Management Accounting:A Game Theoretic Way

Abstract

This paper proposes a model based on dictator game to encounter prevailing problem regarding information asymmetry given the no-negotiating behaviour of transacting parties. This model takes into account the price elasticity of accounting information, quantum of available accounting information and expected utility level achieved by principal and agent. Suggested optimal negotiating behaviour can result in reduction of information asymmetry prevailing between transacting parties. Roles of management, accountants and competitors are suggested hereafter in accordance with the solution provided by the model.