Hidden information model of risk management for virtual enterprises based on distributed decision-making

In view of the virtual enterprises´ characteristics, such as the diversity of partners and distribution of cooperative regions, the idea of Distributed Decision-Making(DDM) is applied to the management of the virtual enterprises´ risks. The principal agent problem is discussed between the leaders and partners on risk management. The disadvantageous effects on leaders are pointed out for hidden information after contracting. The risk management model of moral hazard with hidden information (DDM) is developed for those virtual enterprises which are in relation non-team and may exploit their information in an opportunistic way. The inconsistency in the decision-making between leaders and partners is solved for asymmetric information. The enumerate algorithm and Lingo software are used to do the simulation.