Abstract:

Based on game theory and information economics, this paper constitutes a double principalagent model to describe the game relations among the central government, the governmental departments, and the Internet corporations as three game players in China’s Internet regulation. The public opinion towards Internet regulation is the key factor to the revenue of the three players. The optimal effort level of Internet corporations does not depend on the incentive by the government departments directly, however, the effort and revenue level of the departments relates close to the incentive by the central government. The more likely the central government is risk aversion, the less revenue it will get and the more incentive it will exert to the departments.

Key words: Internet regulation, Stakeholder, Game theory, Principalagent