An Extended Study of the HU Theory
For principal-agent problem Involving quantitative indexes such as amount of profits and amount of sales, there must be a problem of base etermination. But how could the base be determined has become a difficult problem across the world because the information asymmetry exists between the principal and the agent. The HU Theory put forward by Professor Hu Zuguang is an innovative method to solve the principle-agent problem effectively. In our practice of using HU Theory in Chinese corporate, the agent will automatically raise the profit target to maximum level he can reach. However, HU Theory is built on the assumption that the agent knows exactly his ability. In reality the agent has only rough idea about the amount of actual profit. The paper provides a further discussion on HU Theory in case of uncertainty of the future profit. We first analyze the nature of the original system and then construct a new system. The system sets up the overstating incentive mechanism to motivate the agent to bravely state a higher figure when the amount to be actually completed is uncertain and strive to accomplish it.In this way, the problem that the amount stated by the agent is too conservative in the original system is solved. Then the parameter relationship is supplemented to ensure the realization of its function of encouraging the agent to overstate after the nature of the original system being added the overstating incentive coefficient is analyzed. Finally, the new system is compared with the original system to find their respective advantages and disadvantages as well as conditions of application.
HU Theory agent principal self-offered actual profit net gain
Zuguang Hu Jing Hu
School of Business Administration in Zhejing GongShang University Zhejiang Gongshang University No.1 School of Business Administration in Zhejing GongShang University Zhejiang Gongshang University No.
国际会议
The 10th International Conference on Intelligent Technologies(第十届智慧科技国际会议 InTech09)
桂林
英文
272-278
2009-12-12（万方平台首次上网日期，不代表论文的发表时间）