Research On Optimal Control Span And Incentive Under Multi- Agency:Discussing A Hierarchy

Hierarchy is a classic form of organization of enterprises, a typical feature of the enterprise is the multi-agency, this paper research the optimal incentive and control span of enterprise which is under multi-agency. The traditional principal-agent theory focuses on relatively simple principal-agent problem, ignoring the existence of real multi-agency background of the enterprise. In addition, the traditional literatures of hierarchy. depending on the agent just has one ability, which depart from the real backgrounds that the agent has more than one ability. In the paper, the traditional simple principal-agent model is expanded to a multi-agent model, the agent’s ability is expanded from one to three:decision making, incentive and supervision.We calculate the mathematical expression of optimal control span of the model and fully explore its significance in economics and management, then we give some policy recommendations. Our study finds:In the condition of maximizing net benefits of principal, optimal control span increases along with the increase of productivity, the increase of agent’s ability of decision-making, the increase of agent’s ability of supervision. Optimal control span decreases along with the increase of efforts of subordinate.We reveal the equilibrium condition of multi-agent incentive contract, our study finds:when the product of productivity, supervision and decision is less than half of natural base, the enterprise should improve the level of optimal incentives, and the higher the level of effort of agents is. the greater the increase of incentives is; when the product of productivity, supervision and decision is more than half of natural base, the enterprise should decrease the level of optimal incentives, and the higher the level of effort of agents is, the greater the decrease of incentives is. Incentives should decrease and the decline of incentives is smaller and smaller if the level of productivity, supervision and decision increases. The income gap will increase within the enterprise with the increase of the level of productivity, supervision and decision.