Abstract: Freight damaging is one of the prominent problems in the process of logistics service. In order to control cargo freight damage, the optimal cooperation contracts between the cargo owner and the carrier were studied in this paper. The background is that the cargo owner is in charge of cargo packaging, whereas the carrier is responsible for cargo transportation. The damage can be caused by packaging or transportation. Both the owner and the carrier could endogenously make efforts to improve packaging rationalization or transportation rationalization, and then lower the logistical freight damage rate. However, as their efforts is not observable, they have the motivation of opportunism, leading to the moral-hazard.
In the single moral-hazard case, the carrier's transportation rationalization effort is not observable, whereas in the double moral-hazard case, neither the cargo owner's packaging rationalization effort nor the carrier's transportation rationalization effort is observable. A reward/penalty contract for each case was designed considering whether the owner's damage traceability is controllable.
Taking the optimal packaging rationalization and transportation rationalization efforts in the case of information symmetry as a reference, the contracts parameters in different symmetric cases were determined based on Principle-Agent model. It is found that in the single moral-hazard case, the reward or the penalty contract alone could motive the owner and the carrier to exert the aforementioned optimal efforts, and thus reduce the damage rate to the minimum level. But in the double moral-hazard case, the two contracts must be combined together to reach the same effect; The optimal contact for the double moral-hazard case also applies to the single moral-hazard case; With stronger damage traceability, the owner is advised to decrease the penalty on the carrier; Besides, compared with the case when damage traceability is uncontrollable, the owner should also lower the penalty when it is controllable.
Our contribution lies in constructing the relationship between the damage rate and the bilateral efforts of packaging rationalization and transportation rationalization, and simultaneously considering the moral-hazard and damage tracing problems in designing the cooperation contracts. The results of the study will be helpful for the cargo owner to coordinate with carrier in lowering the freight damage rate.

Key words: moral hazard, freight damage tracing, freight damage control, reward and penalty contract