Study On Contract Designing Of Service Outsourcing Under Asymmetric Information

The process of production can be broken down into different parts, which is due to the development of information technology and the globalization along with the rise of trade in services in the past few years. Service outsourcing industry has also gained a dramatic development which is driven by the technological innovation. As a new business model, service outsourcing is being used by more and more corporations to develop their core competency. The expanding outsourcing market has brought not only much opportunities for those developing countries but also more drastic competition for services vendors.With the booming of service outsourcing, some problems exposed gradually. Some reasons results in termination of the contract between the buyer and vendor, which include the imperfect market, the ambiguity of both right and obligation, the private information possessed by the service providers. The asymmetric information during the process of transaction could bring hazard for the buyer. To resolve the moral hazard, one can construct an appropriate contract mechanism, which can also facilitate the long term cooperation.By illustrating the characteristics of asymmetric information, this paper bring forward the resolution that combining the formal contracts and relational contract to construct a bilateral governance model; According to an analysis of asymmetric information between the services buyer and service provider, this paper proposed to sign an incentive-based contract as both sides are willing to establish a long-term cooperation, and design an additional incentives which is based on comparing the realistic output to the anticipant output, meanwhile, adjust and optimize the original contract model to provide a reference and recommendations for the services buyer before contracting; this paper constructs a long-term relational contract based on the repeated games, gives an proper range of the best incentives; according to the analysis of two different types of governance mechanisms, this paper constructs a bilateral dynamic contractual governance model which is based on both formal contract and relational contract, it provide a more rational governance model for the governance of service outsourcing transaction.