Research On The Application Of Methods For Solving The Principal-Agent Problems

The principal-agent problem attracts many researchers due to its popularity in reality, and there are tremendous amount of literatures in this field. In order to satisfy the needs for researching on the actual management problems of the telecom operators, this dissertation systematically does research on several kinds of the principal-agent models and their solving methods, and successfully applies these results to solve two actual problems.Based on amount of relative literatures, summarizes the changes of the objective function and its constraints when the reality changes, and also the methods of solving the changed models, including the static models, the continuous-time models, and the multi-period models.Apply the solving methods into the capital budgeting and managerial compensation problem. Through combing and modifying two models, build a new model, and compare the results after introducing implicit incentives. Then, add a premium pool to study the changes of the strategies adopted by both the principal and the agent in two-period and three-period respectively.Disscuss the incentive problem between the headquarters and the divisions, and obtain one result showing that under certain assumptions, the effort level of the agent remains unchanged in both the static and the continuous-time models.According to the above materials, this dissertation consists of six chapters. The first chapter is the introduction, including the research background, the research purpose, the main content and the structure.To build a model, the builder needs to specifically depict the problem. The second chapter illustrates the principal-agent problem in detail, with an analysis frame for this kind of problem. The objective function and its constraints of the principal-agent problem are easily altered by the combination of the source of asymmetric information, the occurring order of the information asymmetric problems, and some other restrictions. Therefore, it is necessary to adopt the analysis frame to seriatim analyze a certain problem, then, find the corresponding method to solve it.When the objective function or its constraints change, they need new methods to solve. The third chapter aims at to summarize the methods for solving the principal-agent model under distinct circumstance, and primarily discusses the methods for solving the static and the continuous-time models of the principal-agent problem under certain constraints, including complete information, pure asymmetric information, and mixed asymmetric information. The mathematical concepts are also presented when employed in relevant solving steps. At the end of this chapter, the methods for solving the multi-period model are also generally introduced.As the application of the results of chapter three, chapter four and five build models for actual problems respectively. The fourth chapter studies that how could the enterprise owner utilize capital budgeting and managerial compensation, under information asymmetry, to effectively allocate capital and motivate managers.In chapter five, the multi-product marketing problem is selected as the study object, and consulting the methods in chapter three, this chapter builds the static and the continuous-time models for this problem, solves them and discusses the results under distinct restrictions.As the last chapter, the sixth chapter concludes the whole dissertation, and points out the main innovation, the limits and the future research fields.To solve a problem, we need to build a model, solve it and analyze the results. This dissertation emphasizes only the solve step, with the purpose of summarizing the methods of solving the principal-agent problem and presenting the theories used in each step, for the convenience of well understanding and using the principal-agent theory.