Principal-agent model based on dual cost control standards effect

MENG Fan-sheng, ZHOU Yu

Systems Engineering - Theory & Practice ›› 2015, Vol. 35 ›› Issue (6) : 1440-1448.

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Systems Engineering - Theory & Practice ›› 2015, Vol. 35 ›› Issue (6) : 1440-1448. DOI: 10.12011/1000-6788(2015)6-1440

Principal-agent model based on dual cost control standards effect

  • MENG Fan-sheng1, ZHOU Yu2
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Abstract

Cost control standards established by Taylor's standards setting method have single level characteristics, go against to improve the validity of enterprise cost control. The changes of human's rationality, emotion and cognition make dual cost control standards emerge. Managers not only need to establish double cost control standards but also need to make the reasonable incentive contracts to encourage workers; in order to maximize self-interest, workers select their efforts according to their own information, thus produces a dynamic game between workers and managers. Through the establishment of principal-agent model based on dual cost control standards effect, this paper analyses the effects of the differences of managers incentive contracts on the degrees of workers' effort. It can be found that there is a positive correlation between the degrees of workers' effort and incentive degrees they got, for the workers reach different cost control standards, managers should set different incentive coefficients, to achieve the humanization management of cost control.

Key words

cost control standards / incentive / principal-agent / cost control validity

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MENG Fan-sheng , ZHOU Yu. Principal-agent model based on dual cost control standards effect. Systems Engineering - Theory & Practice, 2015, 35(6): 1440-1448 https://doi.org/10.12011/1000-6788(2015)6-1440

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