THE APPLICATION OF THE GAME THEORY (PRINCIPLE AGENT) APPROACH IN THE MUSHAREKAH CONTRACT

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ABDOLI GHAHREMAN; QAVAMI SAYYED HASSAN

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Journal: JOURNAL OF ISLAMIC ECONOMIC STUDIES Year:2012 | Volume:4 | Issue:2 (8) Page(s): 165-183

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Title

THE APPLICATION OF THE GAME THEORY (PRINCIPLE AGENT) APPROACH IN THE MUSHAREKAH CONTRACT

Author(s)

ABDOLI GHAHREMAN | QAVAMI SAYYED HASSAN | Issue Writer Certificate

Keywords

MUSHAREKAH CONTRACTQ2

PRINCIPLE-AGENT MODELQ2

SYMMETRIC INFORMATIONQ2

ASYMMETRIC INFORMATIONQ2

MORAL HAZARDQ2

ADVERSE SELECTIONQ2

Abstract

The paper tries to provide a new methodology for the analysis of the MUSHAREKAH CONTRACT as an Islamic finance instrument. For this sake, the MUSHAREKAH CONTRACT is comparatively analyzed using the game theory (principle agent). Considering the fact that the information set between principle (bank) and the agent (customer) might be symmetric or asymmetric, the MUSHAREKAH CONTRACT is analyzed in two different cases in the extended form of the games and the best strategy which leads to the maximum profit is shown. It should be noted that in the case of SYMMETRIC INFORMATION, the cost of contract is low and information rent is not available. In this context, the MUSHAREKAH CONTRACT becomes operational just by considering the condition of Musharekah. However, in the case of ASYMMETRIC INFORMATION, the provision of the MUSHAREKAH CONTRACT gets complex and if the bank faces the problems of MORAL HAZARD and ADVERSE SELECTION, the condition for satisfaction of MUSHAREKAH CONTRACT will be different. This paper discuses different situations using the extended form of games.

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APA: Copy

ABDOLI, GHAHREMAN, & QAVAMI, SAYYED HASSAN. (2012). THE APPLICATION OF THE GAME THEORY (PRINCIPLE AGENT) APPROACH IN THE MUSHAREKAH CONTRACT. JOURNAL OF ISLAMIC ECONOMIC STUDIES, 4(2 (8) ), 165-183. SID. https://sid.ir/paper/220837/en

Vancouver: Copy

ABDOLI GHAHREMAN, QAVAMI SAYYED HASSAN. THE APPLICATION OF THE GAME THEORY (PRINCIPLE AGENT) APPROACH IN THE MUSHAREKAH CONTRACT. JOURNAL OF ISLAMIC ECONOMIC STUDIES[Internet]. 2012;4(2 (8) ):165-183. Available from: https://sid.ir/paper/220837/en

IEEE: Copy

GHAHREMAN ABDOLI, and SAYYED HASSAN QAVAMI, “THE APPLICATION OF THE GAME THEORY (PRINCIPLE AGENT) APPROACH IN THE MUSHAREKAH CONTRACT,” JOURNAL OF ISLAMIC ECONOMIC STUDIES, vol. 4, no. 2 (8) , pp. 165–183, 2012, [Online]. Available: https://sid.ir/paper/220837/en

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