THE COMPLEX DYNAMICS OF AGENT'S EFFORT DECISION WITH FIXED CONTRACT AND ADAPTIVE EFFORT ADJUSTMENT

摘要

Under a given principle-agent contract and a assumption of incomplete rationality, we build a dynamic model on agent's effort decision with adaptive effort adjustment and carry out a numerical simulation and a forecasting based on tie Lyapunov exponent. The results show that the suggestion to control agent's efforts or behaviors by a performance-based contract in the classical principle-agent theory does not hold true universally because the existence of chaos of agent's effort decision is not related to the parameters of such a contract and indicates that the future efforts depend sensitively on initial states. Further, the predictability of agent's chaotic effort decision and the intrinsic mechanism of the effort decision dynamics give a helpful highlight to the applications of the classical theory, i.e. replacing a traditional performance-based contract by a behavior-based one, when the agent's effort dynamics is likely to be chaotic.