A Game-Theoretical Analysis on the Agency Problem with Respect to Poor Village Teachers in China

This paper examines the payoff interplay between poor rural teachers, village committees, and local governments in China. Based on the principal-agent theory, the author builds a two-stage dynamic game model for the teachers to become agents and a three-stage dynamic game model to motivate the teachers to work hard, and works out the equilibrium solutions. Based on model analysis and field investigation, it is concluded that an annual salary which is three times the average annual income of a local villager is the key to the teachers' acceptance of their job. Further, it is suggested that performance evaluation, salary publicity and other preferential policies be adopted to motivate the agents and to ensure the principals' supervision over the agents.