Research Methods And Models Of Principal-Agent Problems

Coordinating the economic relationship between principals and agents is an important management problem in financial market. Especially in corporation pro-duction,market supply and physical distribution, it has been more and more sig-nificant. The acquisition of information has received considerable attention in firms and factories. Because even when information asymmetries do not exist at the time of contracting, the parties to a contract often anticipate that asymmetries will de-velop something after the contract is signed. For example, after an owner of a form hires a manager, the owner maybe unable to observe how much effort the manager puts into the job. Similarly, the manager will often end up having better infor-mation than the owner about the opportunities available to the firm. Anticipating the development of such informational asymmetries, the contracting parties seek to design a contract that mitigates the difficulties they cause. These problems are en-demic to situations in which one individual hires another to take some actin for him as his "agent". For this reason, this contract design problem has come to be known as the "principal-agent problem". The owner-manager relationship is only one ex-ample; others include insurance companies and insured individuals, manufacturers and their distributors, a firm and its workforce, and banks and borrowers.This paper focuses on the core of principal-agent problems. Principal-agent problems i.e. designing contracts focus on designing optimal contracts. Agents will take different action based on the different contracts, and principals must do their best to design optimal contracts. The major achievements are summarized as follows:●Summarize the core and key of principal-agent problems;●Establish more rational static models of principal-agent problems, and discuss in detail based on five instances;●Considering different inner conditions of principals and agents, establish match- ing models of principal-agent problems;●Using the methods of stochastic optimal control, establish dynamic models of principal-agent problems, analyze result and carry out numerical simulation in the end.Moreover, based on the models discussed, we propose more complicated prob-lems and prepare adequately for the prospective research. we give some better algorithms which can been applied in many similar problems.