Design, comparison and selection of two competition incentive mechanisms

Area of Science:

• Economics
• Game Theory
• Organizational Behavior

Background:

• Principals often face moral hazard issues with multiple agents.
• Competitive mechanisms are employed to mitigate these issues.
• Mechanisms are categorized as result-oriented or process-oriented.

Purpose of the Study:

• Analyze optimal incentive contracts under different competitive modes.
• Investigate agent matching strategies to reduce conflicts.
• Determine the optimal application scope for each system.

Main Methods:

• Theoretical analysis of principal-agent models.
• Comparative analysis of result-oriented vs. process-oriented competition.
• Modeling agent ability matching scenarios.

Main Results:

• Both competitive modes effectively incentivize agent effort.
• Excessive result-oriented competition can harm principal benefits.
• Optimal agent pairing follows a 'strong-weak' > 'strong-strong' > 'weak-weak' hierarchy.

Conclusions:

• Competitive mechanisms are effective but require careful design.
• Agent pairing significantly impacts outcomes and conflict mitigation.
• Findings offer guidance for optimizing principal returns through competition.