Study on scheme of agent compensation and quality of service

Agent is a populous phenomenon in economy system today no matter in industry sectors and in services sectors. Agent has become an efficient method to enlarge business for many enterprises in service sectors, for example Mcdonald´s. But how to encourage the agent improving the quality of service as demanded by the firm is an impotent problem. After all the agent keep in touch with customers directly instead of firm, the quality of service offered by the agent affect the impression of the firm among customers. In some extent this is a kind of principle-agent problem. In this study we develop a principle-agent to explain the relationship between the compensation scheme offered by firm and the incentive of agent to improve the quality of service. We find the when the effort can be perceived the agent refers to the fixed compensation. When the effort cannot be perceived, the agent inclines to decrease the level of effort. But when the cooperation happens in more than one period, the agent considers the effect of reputation and refers to take effort to improve the quality of service.