On the Principal-Agent Theory in Government's Crisis Management

In government's mechanism of public crisis management,there is a complicated principal-agent relation between people and government and between different levels of government.This principal-agent model offers a solution to problem of gaming on part of local governments,thereby effectively strengthening control of latter.The principal-agent theory attempts to establish an incentive mechanism that makes agent act for principal's interest.Therefore,what principal should focus on is how to reward or punish his agent based on observable information,so as to encourage latter to choose an action that can best benefit principal.The analysis of this theoretical model intends to scheme an incentive contract that best satisfies needs of central government and local people as principal,so as to maximize the principal's payment and achieve goal of successful crisis management.