Incentive Contract Study Under The Situation Of Agent Rotation

Every enterprise may face the problem of agent rotation. When the agent of the enterprise will be changed, the utility conflict between the Principal and Agent mainly comes from the time preference conflict. When the information is asymmetrical, such a time preference conflict show as the two sides pursue different interest objects—on one side the principal pursue long-term benefits' maximization, on the other side the agents pursue short-term benefits' maximization. The Agent Problem may mainly show as: The outgoing agent provides insufficient efforts on long-term yields driven acts which make the loss of long-term yields of the principal. In this situation the principal faces a huge Agent Cost. On one hand every enterprise may face the problem of agent rotation, on the other hand the long-term yields driven acts is so important to the enterprise development. So how to mitigate such agent problem is an important topic.This dissertation chooses such agent problem as the research setting. From the perspective of incentive contracts' effects on mitigating the agent problem, we study two types of incentive contracts, one is the incentive contract based on current yields, the other is the incentive contract based on long-term yields. We establish a two-stage model of game between the principal, the first and the second agent. We get the excellent solutions through solving the models of symmetric and asymmetric information. Then we analyze the different solutions we have got, we find the factors which produce the different agent cost, and use the functions to quantify affections of these factors. Based on these studies, finally we give out some main conclusions about the improvement of the incentive contract.The author's studies show that: (1) Under the incentive contract based on the current yields of agents' acts, acts' distribution deviates from the optimal solution which show as 9 in this dissertation. Because of theθ, the incentive on long-term yields driven act is not sufficient or to get a optimal effort on long-term yield driven act under such contract is uneconomic which resulting in long-term yields deviated from the optimal, there is a positive correlation between the agent cost and act's distribution deviationθ. (2) Under the incentive contract based on the long-termyields of agent's acts through the introduction of performance evaluation system-p,the principal could improve deviation of the distribution so as to reduce agent cost. Whether such improvement could achieve and the level of improvement depend on the comparison of incentive distortion of evaluation system to the deviation of acts' distribution deviation under the incentive contract based on the current output of agents' acts.