Abstract
Christensen et al. (Dynamic incentives and responsibility accounting: a comment, J. Account. Econ. 35 (2003) 423) examine Indjejikian and Nanda (J. Account. Econ. 27 (1999) 177) and suggest that our characterization of the inefficiency arising from limited commitment as a "ratchet effect" phenomenon is misplaced. In this reply, we describe the ratchet effect as commonly understood in the literature, clarify the role of contractual commitments in our analysis, and then illustrate why both the substance and interpretation of our original results continue to be appropriate.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 437-441 |
| Number of pages | 5 |
| Journal | Journal of Accounting and Economics |
| Volume | 35 |
| Issue number | 3 |
| DOIs |
|
| State | Published - Aug 2003 |
| Externally published | Yes |
Keywords
- Contracting
- Performance measurement
- Ratchet effect
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
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Cite this
Indjejikian, R., & Nanda, D. (2003). Reply to: Dynamic incentives and responsibility accounting: A comment. Journal of Accounting and Economics, 35(3), 437-441. https://doi.org/10.1016/S0165-4101(03)00041-7