A Venture Investment Principal-agent Model Base on Game Theory

This paper uses the approaches and models of game theory to analyze principal-agent problem between venture investment firm and venture enterprise. We analyzed the asymmetric information between venture investment firm and venture enterprise. We described the income and cost at this principal-agent problem under asymmetric information. Give mathematics expressions about every step action decision and their result-the cost, the profit of this principal-agent problem. We present a game model base on principal-agent theory under the asymmetric information; give the application and numerical result of our model. Then, discuss the optimum principal-agent cost, the profit and the action between venture investment firm and venture enterprise base on our model. Due to our model, a conclusion can be drawing that the effort degree under asymmetric information less than perfect information. Asymmetric information between venture enterprise and venture investment firm will lead to moral hazard. The lower effort level will lead to the agent cost which do not existed in perfect information circumstance. The intensity of venture investment firm selected due to the supervise cost and correlative profit.