Principal-agent Model on Investing to Supplier with Asymmetric Information

This paper researched the game between the supplier and the retailer when the retailer invests to the supplier with analysis frame work of principal-agent theory under asymmetric information, and compared the decision result under asymmetric information with symmetric information. At the same time, this paper analyzed different parameter, such as the ability level coefficient of the supplier, the risk aversion degree, the effort cost coefficient, and the nature status of the supplier, how to influenced the expected revenue of the retailer. Finally, how new observation variable affects the incentive of the supplier was studied.