Title: Study of Strategy on Contract Risk in Virtual Alliance
Abstract:Contract risk in virtual alliance,i.e.moral hazard with hidden action,depends on both combining explicit and implicit incentive mechanisms and considering insurance function of comparisons of relative...Contract risk in virtual alliance,i.e.moral hazard with hidden action,depends on both combining explicit and implicit incentive mechanisms and considering insurance function of comparisons of relative achievement.The risk in short period cooperation is settled down by optimal incentive contract (explicit contract),which includes internal or external monitoring variables.When designing the incentive scheme,the sponsor should consider not only consistency of the cost of incentive alliance member and his profit but also equilibrium of himself in income and cost.It is only when the observing cost is less than the reducing of agent's cost that the sponsor can write monitoring variable into contract.For a long period corporation of alliance,the effect of implicit incentive mechanism should be exerted.With the effect of present effort on output,the judgment of market to ability is improved,strengthens reputation effects,weakens ratchet effects,and boosts up incentive and monitoring mechanism,then further the contract risk in virtual alliance will be effectively resolved.Read More
Publication Year: 2004
Publication Date: 2004-01-01
Language: en
Type: article
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