Incentive Mechanism Designs For Project Management Under Asymmetric Information

With the development of social economy and the intensification of market com-petition, the project management is attaching more and more attention by Chinese enterprises. Project management have found applications in all fields and appeared in different types and scales. The manager of the enterprise needs to correctly un-derstand the information asymmetry and effectively design the incentive mechanism to solve the conflict of interest in project management setting which is a multi-stage decentralized decision making system. The purpose of this dissertation is to study the design of incentive mechanism in engineering project management and new prod-uct development project management under the asymmetric information. The main contents researched in this dissertation are as follows:In Chapter 2, the design of incentive mechanism in engineering project manage-ment with serial tasks under the asymmetric information is studied. Consider a man-ager who operates a project consisting of multiple tasks that for technological reasons can only be performed sequentially by different subcontractors. In the presence of con-tractor’s unobservable effort, two classes of bilevel programming models based on the expected value criterion and the critical value criterion are developed. In the case that the task completion times are mutually independent, taking advantage of the structural characteristics, a two-step optimization method are employed to derive the optimal incentive contract in equivalent model. In the general case that the task completion times are correlative, an approximation approach-based hybrid genetic algorithm is designed to solve the proposed bilevel programming models to derive the optimal in-centive contract. Finally, a numerical example of a engineering project is conducted to demonstrate the modeling idea and the effectiveness of the proposed methods.In Chapter 3, the design of incentive mechanism in engineering project man-agement with uncertain completion time under the dual asymmetric information is studied. Consider a risk-neutral project manager who engages a risk-averse contractor to complete a project. In the presence of dual information asymmetry including the contractor’s unknown risk sensitivity and unobservable effort, an uncertain principal agent model is presented by characterizing the assessment about the risk sensitivity and project completion time as uncertain variables. The optimal duration contract mechanism is derive by solving its equivalent optimal control problem with Pontrya-gin maximum principle. The result demonstrates that the project manager distorts the penalty term for all contractor’s risk types (but the lowest) downward.In Chapter 4, the design of incentive mechanism in new product development project management with monitoring mechanisms under the asymmetric information is studied. Consider a NPD problem where a project manager researches and devel-ops a kind of new product for a senior executive. For a mixture of adverse selection and moral hazard in new product development,two monitoring mechanisms:(1) the idea information-based monitoring mechanism wherein the senior executive engages one supervisor to monitor the project manager’s idea information; (2) the effort-based monitoring mechanism wherein the senior executive engages another supervisor to monitor the project manager’s effort are analyzed and two classes of bilevel uncertain principal-agent monitoring models are presented. The optimal wage contract mecha-nism is derive by solving its equivalent problem. The result shows that from the senior executives’s perspective, monitoring the project manager’s effort has higher impact on profits than that from monitoring the project manager’s idea information.In Chapter 5, the design of incentive mechanism in two-stage new product devel-opment project management under the dual asymmetric information is studied. Con-sider a senior executive contracting with a project manager to develop a new product. The project manager is responsible for executing two stages:a research stage and a de-velopment stage. It is likely that the existence of dual information asymmetry between the senior executive and the project manager roots from the fact that the idea value of the new product in early research stage is unknown to the senior executive and the project manager may exert unobservable effort in later development stage. The idea value of such new product and the corresponding revenue are assumed to be uncertain variables. Within the framework of uncertainty theory, four kinds of uncertain princi-pal agent models are presented, and then the closed form expressions for the optimal wage contracts are derived. The result indicates that acquiring more information on an aggressive project manager’s idea always has higher impact on the senior executive’s profits than contracting on his effort.