Outsourcing brings multiple profits for enterprises, simultaneously produces comparatively large risk, especially moral hazard from vendors happens unavoidably in outsourcing because the cooperation between the two outsourcing parties is a typical principal-agent relationship. The paper builds a model of the optimized incentive contract for an enterprise to avoid moral hazard from its vendor, and builds a model of the reputation mechanism effect to prevent the repetitive moral hazard.

(Xiaoguo Jiang; Hui Yang; Journal of Interdisciplinary Mathematics. 2018,21(5):1315-1320)