Design of incentive compatible R&D contract embedded with bi-direction options in CoPS
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F270.7; F272.3; F273.7

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    Abstract:

    Differing from the current studies which focus on the process management or the reduction of the information asymmetry, this paper establishes an incentive compatible outsourcing contract model for R&D in CoPS. The following results are derived by comparing three models—the standard game model( model I) , the modified game model embedded with quality guarantee( model II) , and the improved model embedded with the bi-direction option of sharing and penalty( model III) : 1) Process control( model I) , cannot solve the problem of sub-optimal in whole , nor can it eliminate the sub-contractor s lazy behavior; 2) To a certain extent,sub-contractors lazy behavior can be alleviated by quality guarantee( model II) ; 3) The improved contract ( model III) can solve the above two problems and achieve overall optimum, since information asymmetry will be eliminated when the sub-contractor income is decided by his own effort. This paper examines information asymmetry from a new perspective and solves the problems of sub-optimal in whole and laziness. It is an expansion and deepening of incentive compatibility theory and contract governance in outsourcing field, and it provides a new idea for outsourcing contract governance in management practices.

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  • Online: October 25,2021
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