The Evolutionary Game Analysis On Manager Incentive

With the knowledge workers and quality services is increasingly becoming an important source of the competitive advantage to the company. the battle for talents is more fierce. To succeed in the market, you must be able to attract and retain the best talents. The majority enterpe ises need to solve this problem how to incentive talents appropriately so as to allow them to service for enterprises. It is particularly important to incentive managers because they are the owner of knowledge and intelligence.Domestic and foreign scholars on the study of the incentive theory is divided into two aspects: one is from view of the management point; the other one is from the view of the perspective of economics. Management study the incentive problem begin with Maslow's hierarchy of needs theory, then Maclelland, Herzberg, Vroom et al studied this issue deeply, and so for management incentive theory has tended to mature. Management incentive thoery focused on the analysis of people's generality, mainly study what kind of incentive mode and how to stimulate managers. Economic incentive thoery is based-on the economic man to the starting point, and its purpose is profit maximization or utility maximization. For this kind of research, scholars at home and abroad focused on the study of the principal-agent theory. Pricinpal design a contract, which can maximum their utility at the same time make agents'utility maximization. The end of te twentieth century, some scholars began to introduce the dynamic game theory into the analysis of the relationship between shareholders and managers, and designed the implicit incentive mechanism to them. Fama's research shows that in competitive markets the past operating performance dicided manager's market value. In the longer term, managers must hold fully responsible for their own actions. Only work actively and diligently, managers can improve their reputation in the manager market, so as to increase the income of the future.Traditional economic theory assumed that participants have perfect rational decision behavior. For research manager incencitive, most scholars assume that the shareholders and managers have perfect rational and they can choose their own optimal strategy in each game, so as that shareholders and managers will be able to achieve utility maximization. The modern economics shows that people's behavior is not perfect rational, and to achieve this state is almost impossible. John Maynard Smith put forward evolutionary game theory combined with the biological evolutionary theory and the traditional game theory. The evollutionary game, learning game just is a powerful tool to analysis game activity based-on inperfect ration.The topic selection significance of this paper is using the evolutionary game thoery based-on the assumptions of limited rationality. Shareholders and managers can seek more better strategy through testiong, copying,comparison and studying.during the game. This assumption is closer to reality. On the other hand, this article analysis manager incentive from the perspective of evoltionary game and enrich the manager incentiive theory.In this paper, I apply evolutionary game into the manager's longterm incentive which based on the principal-agent theory, and then analysis the game between shareholders and managers. Finally, we will obtain the evolutionarily stable strategy and the asymptotically stable unerd the replicon dynamic.The structure of this article is as follows:Chapter 1, Introduction. This part mainly introduces the reseach background and the topic selection significance, and put forward the research thought and the framework of this paper.Chapter 2, Managers incentives outlined. This part mainly introduces the research results about manager incentive at home and abroad.Chapter 3, The foundation of evolutionary game theory. It is the paper's research method. In this part, we describe the evolution stable strategy and the asymptotically stable strategy under the replicon dynamic of the sigle-overall and multi-overall.Chapter 4, the evolutionary game model of manager incentive and model anallysis. Based on the principal-agent theory, this part modeled the issue between the shareholders and managers, establish the evolutionary game model between shanreholders and managers, compare the model to the standard principal-agent model, and then analysis the model to abtain the evolutioanrilly stable strategy and the asymptotically stable strategy ender the replicon dynamic. And this part we give a special case of this model.Chapter 5, conclusions and limitations.Shareholders and managers can't predict each other's actions because of the limited rational. They can choose their own actions through trial and error or learning and so on, finally reaching a stable equilibrium in the long term.We can draw the following conclusions through analysising the evolutionary game model of manager incentive. From the perspective of shareholders, if efforts to stimulate the performance of managers to reduce the wage more than the increase in a fixed income(β₁-β₂)e_i>α₂ -α₁), compared high incentives with low incentives, Shareholders will give managers higher transfer payments, then the shareholders will tend to choose low-incentive. If efforts to simulate managers to reduce the performance of wages less than the increase in fixed salaries (β₁-β₂)e_i<α₂ -α₁), compared high incentives with low incentives, Shareholders will give managers lower transfer payments, then the shareholders will tend to choose hign-incentive. If it is between the two, it will depend on the strength of shareholders and managers'efforts.From the agent's point of view, if the shareholders'incentive intensity lower than managers'special efforts level , this means that the incentive intensity is smaller, managers will choose lower-incentive; if the shareholders'incentive intensity higner than managers'special efforts level , this means that the incentive intensity is smaller, managers will choose lower-incentive, so as to shareholders and managers will abtain more profits; If the manager's efforts level during the high incentive intensity and the low incentive intensity, then managers will choose their own effort level according to changes between the performance wages and the fixed income.In general, if the manager choose efforts, it will be beneficial to shareholders. If shareholders would like managers to work hard, they will use this way to incentive managers which is high incentive intensity and low fixed income. However , we must prevent lacking of incentives. This way of incentive is an evolutionary stable strategy and asymptotically stable strategy under the replicon dynamic in the long-term.