Abstract In this article, the author presents his views about the paper "The Use of Experimental Markets in Auditing Research: Some Initial Findings," by Nicholas Dopuch, Ronald R. King and David E. Wallin. They state that among their first planned extensions to this study are to introduce a strategic auditor and to vary the ability of the legal system to ascertain the auditor's liability for an "audit failure." Since the application of experimental economics to the audit market is still very much in its infancy, it seems desirable to place, instead, a higher priority on expanding the role and variety of market forces. In their summary and conclusions, they suggest that the result of testing this hypothesis bears on the relative validity of the analyses by M. Jensen and W. Meckling and R. Antle. The author questions the appropriateness of using the result in this way. First, it effectively involves using the experiment for parameter estimation, for which laboratory experi- ments are not well suited. Further, it is very likely that the specific finding is due to the asymmetric gains that the experimenters have assigned to the sellers and buyers from a credibility mechanism purchase.
Chee W. Chow (Thu,) studied this question.