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Research on Multiprincipals Selecting Effective Agency Mode in the Student Loan System

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  • Libo Ding
  • Bangyi Li
  • Suling Feng

Abstract

An effective agency mode is the key to solve incentive problems in Chinese student loan system. Principal-agent frameworks are considered in which two principals share one common agent that is performing one single task but each prefers the different aspect of the task. Three models are built and decision mechanisms are given. The studies show that the three modes have different effects. Exclusive dealing mode is not good for long-term effect because sometimes it guides agent ignoring repayment. If effort proportionality coefficient and observability are both unchanged, principals all prefer common agency, but independent contracting mode may be more efficient in reality because not only the total outputs under that mode are larger than those under cooperation one, but also preferring independent contracting mode can stimulate the bank participating in the game.

Suggested Citation

  • Libo Ding & Bangyi Li & Suling Feng, 2014. "Research on Multiprincipals Selecting Effective Agency Mode in the Student Loan System," Mathematical Problems in Engineering, Hindawi, vol. 2014, pages 1-8, May.
    • Handle: RePEc:hin:jnlmpe:835254
    DOI: 10.1155/2014/835254
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