A Game Analysis of Quality Supervision Over Rural Development Projects

Abstract

This paper begins with an analysis of the principal-agent relationship in implementation of rural development projects, and proceeds to conclude that information asymmetry exists in the game relationship between the principal and the agent in quality supervision of rural development projects, which makes it likely for the quality supervision agent to pose moral hazards, and that the introduction of a supervision and penalty mechanism can help achieve the consistency between the two parties in terms of interest goals. When the penalty is imposed to the extent that there comes a mixed equilibrium in the supervision game between the principal and the agent, the principal may supervise the agent in a way that combines key examinations with general ones, and, where necessary, punish severely the individual quality supervisor who has worked poorly.