Abstract: The incentive mechanism is discussed for the principalagent environment. It is assumed that the reliability of the production and management systems in an enterprise is a general information system and the correlative reliability indexes are quantified. A mathematical model is developed to describe the incentive mechanism with the influence of uncertainty factor and information asymmetry taken into account. This model describes the relation between the effectiveness and the observation levels. Based on this model, by using Baysian theory under the asymmetrical information, analysis is carried out to show the effect of different observation level on agent"s effort, risky cost, incentive sharing rate and agency cost, etc. Results show that high level observation can promote the incentive and reduce the cost.    

Key words: reliability, principal-agent theory, information asymmetry, Baysian theory