Research on Cost Control Strategy under Asymmetric Information

The problem how a manager motivate producers to reduce product costs under asymmetric information is discussed on a basis of principal-agent theory. Under asymmetric information, manager can not monitor producers´ effort to reduce costs; therefore, manager needs to motivate producers. The manager determines a contractual basic cost according to his own requirement and producers´ self-reported cost, and establishes a model to maximize manager´s expected utility under the conditions of producers´ individual rationality constraint and incentive compatibility constraint. The model uses incentive and punishment coefficient as decision variables and the evolutionary programming algorithm is used to do the simulation.