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A Game Analysis of Incentive Mechanism for Supervision over Rural Development Projects

Beginning with information asymmetry between a development agency and its internal quality supervision department in the course of quality supervision over a rural development project, this paper analyzes the principal -- agent relationship between the development agency and its quality supervisors, as well as moral hazards which may arise from this relationship, and establishes a game model regarding the related incentive mechanism to find out the best incentive mechanism that the principal applies to the supervision agent and to define the incentive coefficient, with a view to incentivizing the supervision agent and effectively reducing the occurrence of moral hazards.