Journal of South China University of Technology (Natural Science Edition) ›› 2010, Vol. 38 ›› Issue (3): 156-161.doi: 10.3969/j.issn.1000-565X.2010.03.028

• Mathematics • Previous Articles    

Mathematical Description and Application Analysis of Principal-Agent Relationship

Deng Ze-hui   

  1. Research Center of Financial Engineering, South China University of Technology, Guangzhou 510640, Guangdong, China
  • Received:2009-06-22 Revised:2009-12-11 Online:2010-03-25 Published:2010-03-25
  • Contact: 邓泽辉（1970-），男，博士生，主要从事数量经济学研究． E-mail:zhdeng@scut．edu．cn
  • About author:邓泽辉（1970-），男，博士生，主要从事数量经济学研究．
  • Supported by:

    国家自然科学基金资助项目（B5126214）;广东省社会科学重点研究基地重大项目（08JDXM79007）

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Abstract:

This paper deals with the principal-agent relationship, a complex function representing the relationship among different variables, and introduces the State-Space Formulation method to demonstrate its basic model and general framework. With the help of Kuhn-Tucker theory, the solution to the model is then analyzed. Afterwards, with the rural cooperative finance as an example, the application of principal-agent theory is discussed. It is con- cluded that, in the setting of risk-sharing mechanism between government and the person in charge of rural coopera- tive finance organization, the moral hazard of the person in charge and various uncertainties should be fully consi- dered. The principal-agent theory is effective in analyzing the contract relationship among different individuals and provides an approach to understanding the contract relationship.

Key words: principal-agent model, Lagrange method, Kuhn-Tucker theory, rural credit cooperative