Master Course: Game Theory Models in Accounting

Course Description:

The course focuses on the formal representation of decision theoretical concepts in accounting. The first part of the lecture provides methodological basis of classical decision theory and game theory. The second part analyses how game theoretical concepts and mechanism design are used in the accounting research. The course will analyze how the accounting process influences this strategic interaction within and across the firms by influencing the players’ incentives and contracts. Furthermore, the course will examine how accounting measurements, and voluntary and mandatory disclosures influence the interaction between capital markets and real investment decisions.

Learning Objectives:

After the course, the students will:

  • be able to understand theories and formal economic modeling used in accounting research,
  • be able to apply the equilibrium analysis concepts to different accounting topics (e.g., earnings management, disclosure of accounting information, and capital market real effects.)
  • have an understanding of the theoretical research in accounting and its implications,
  • be able to summarize the assumptions of the theoretical models in accounting and state, explain and understand the main results of these models.


  1. Introduction
  2. Individual Decision Making under Uncertainty
  3. Accounting Information Systems and the Value of Information
  4. Static and Dynamic Games
  5. Applications in Accounting

5.1. Mandatory and Voluntary Disclosure of Accounting Information

5.2. Mechanisms to Credibly Convey Information

5.3. Earnings Management

5.4. Rational Expectations of Investors (Learning from Prices)

5.5. Connecting Analytical and Empirical Accounting Research



  • Kanodia, C. (2015): Game Theory Models in Accounting (in Chatterjee, K. and Samuelson, W. F.: Game Theory and Business Applications), Springer.
  • Fudenberg, D. and Tirole, J. (1992): Game Theory, The MIT Press
  • Gibbons (1992): A Primer in Game Theory, Financial Times, Prentice Hall.
  • Mas-Colell, A., Whinston, M. D. and Green, J. R. (1995): Microeconomic Theory, Oxford University Press.
  • Original research papers


Exam will be in form of a term paper (Hausarbeit)

  • Analytical literature review that includes discussion and analysis. The focus should be on the application of game theory in accounting. (10 pages)
  • Short written summary and critical analysis of the original analytical research paper in the field of accounting. (2-3 pages)
  • Discussion and presentation of the original analytical research paper.


Digital learning:

  • The course uses Moodle as the learning platform. All the information and material will be regularly posted and updated on Moodle.
  • Presentation slides and additional material will be uploaded and available before each of the scheduled lectures.
  • There will be several problem sets accompanying the lectures. They will be uploaded 1 week prior to the scheduled session.