Game Analysis on Real Estate Investment Trusts under Principal-Agent Theory

摘要

Recently Real Estate Investment Trusts (REITs) has made a rapid development in China. It is a new kind of financing method on real estate containing high income and high venture at the same time. Asymmetric information between real-estate companies and investment trust companies causes adverse selection before credit and moral hazard afterwards. This paper analyzes the problem and the risk between real estate companies and trust investment companies by applying principal-agent theory. Firstly, the paper explains the principal-agent theory of adverse selection and moral hazard and describes the relationship and behavior of the two players. Secondly, the principal-agent game model under definite fixed reward is established and analyzes the relationship among cost, risk probability and income. Thirdly, the principal-agent game model under indefinite fixed reward is founded and analyzes the relationship among profit, effort level and cost. Fourthly, the article analyzes the conclusion and puts forward several suggestions.