ABSTRACT
This chapter provides an overview of the usefulness and applicability of experimental economics to accounting research. Experimental economics represents a research method that employs a controlled laboratory setting and performance-contingent incentives to study individuals’ behaviour, interactive (group) outcomes and market outcomes. Throughout this chapter, we demonstrate that experimental economics is a powerful tool that can be used to address a wide variety of accounting issues, encompassing auditing, financial accounting, managerial accounting and taxes. We begin by tracing the emergence and evolution of experimental economics in the accounting literature. Then, we discuss the necessary elements in using the method, emphasizing facets that give experimental economics a comparative advantage over other research methods and offering examples of topics that lend themselves to this approach. Next, we consider theoretical paradigms used in experimental economics studies, including economics- versus psychology-based theoretical approaches. Once again, we offer examples of representative studies from the extant literature. Subsequently, we elaborate on important design choices that are considered in developing and conducting an experimental economics study. We end with concluding remarks, reiterating the importance and usefulness of experimental economics to accounting research.
