Research On The Design And Application Of Stochastic Contract Under Principal-Agent Model

In this paper,we investigate that under the dual-task principal-agent model,when certain conditions are satisfied,stochastic contracts can lead to more and equilibrium efforts of agents and greater utility for the principal.This paper discusses and compares deterministic and stochastic contracts without and with hidden information,respectively,in sequential order.Finally,a dual stochastic contract that combines the above two stochastic contracts is proposed to explore its incentive effects.After solving a series of principal-agent models under the principal’s utility maximization objective,it is compared with deterministic contracts and simulated numerically.The study shows that:(1)when there is no hidden information,the randomization of the contract share can motivate the agent to put in more effort to improve the principal’s utility and effectively solve the moral hazard problem when certain conditions are met.(2)In the presence of hidden information,a randomized contract with ex post random selection of the contract can motivate the agent to put in more balanced efforts,and the maximum utility of the principal is greater than the utility of the deterministic contract in the limit condition,which can effectively solve the adverse selection problem.(3)Double randomness contract can motivate agents to put more and more equilibrium efforts under certain conditions and improve the principal’s utility,which effectively solves the above two problems.