Game theory analysis on constructing incentive mechanism for professional manager

On the conditions of modern market economy, professional managers have played a central part in the development of enterprises. The key to retaining and making full use of professional managers for enterprises lies in improving employment system and incentive mechanism of enterprises. In this paper, we analyze incentive compatibility mechanism for professional manager, according to game theory, and propose that enterprises should formulate optimal contract, establish reputation system and build the institution of supervision and punishment, in order to improve incentive mechanism for professional manager.