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Principal-Agent Theory Based Risk Allocation Model for Virtual Enterprise
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Journal of Service Science and Management·Volume 03 (2010)·Pages 241–249·Published 29 June 2010·DOI10.4236/jssm.2010.32030
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Abstract
In this paper, we consider a risk analysis model for Virtual Enterprise (VE) by exploring the state of the art of the principal-agent theory. In particular, we deal with the problem of allocating the cost of risk between two parties in a VE, namely, the owner and the partner(s). We first consider the case of a single partner of VE with symmetric information or asymmetric information and then the case of multiple partners. We also build a model for the optimal contract of the risk allocation based on the principal-agent theory and analyze it through specific example. At last we consider the case of multiple principal with potentially many partners based on common agency.
KeywordsVirtual EnterpriseRisk AllocationPrincipal-Agent TheoryRisk AversionCommon Agency
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