Study of Optimal Contract Under Asymmetric Information

Ping Li () and Hong-zhi He
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Ping Li: Luoyang Institute of Science and Technology
Hong-zhi He: Luoyang Institute of Science and Technology

Chapter Chapter 36 in The 19th International Conference on Industrial Engineering and Engineering Management, 2013, pp 373-382 from Springer

Abstract: Abstract The opportunism and information asymmetry between the two parties of a contract alteration give rise to the phenomenon of hold up and underinvestment, as well as the moral hazard problem of hiding information from the other party. This article built up the optimal contract model under asymmetric information by using the principle-agent theory and studied the above problem. The article proved that, under the conditions that the contractor hides information, the optimal contract would decrease the special purposed investment levels, prolong the time limit of the engineering project, and decrease the owners’ utility.

Keywords: Contract alteration; Hidden information; Information asymmetry; Project management (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/978-3-642-37270-4_36

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