No abstract

Common agency is the main feature of public sector’s internal incentive mechanism. As the public sector, endogenous features of PACE will lead to defects of internal incentive system. Regarding the public agent-construction enterprise as an agent of two principals which are client and government, a common agent model is constructed and analyzed in-depthly. The findings of this paper clarify two aspects of theoretical basis for the regulatory policy: 1) the optimal conditions of an incentive contract; 2) the substitution relationship of the tasks of two principals causes distortion to the incentive mechanism and leads to incentive efficiency loss.

Most of the Chinese scholars have simplified the relationship between the client and the agent-construction enterprise as a single-task principal-agent problem, which has ignored the important fact of multitasks, such as progress, quality and cost. In this paper, a multi-task principal-agent model with three tasks, i.e. progress, quality and cost, is constructed to analyze the optimal incentive contractual conditions and multi-task incentive equilibrium mechanism of the agent-construction enterprise, which can provide theoretical basis for the regulatory policy of government investment project.