Abstract: There is a large number of illegal small freight forwarding companies in china. The unfair competition behaviors of these small freight forwarding companies disturb the market order and reduce the service quality. But why can these non-formal freight forwarding companies exist? This is the core problem to be solved in this paper. In this paper, the freight forwarding market is assumed to be a typical principal-agent market and two-sided market. In order to study the adverse selection behavior of the international container freight forwarding market based on the theory of two-sided market and the theory of asymmetric information, an adverse selection model is constructed based on two-sided asymmetric information structure. In the two-sided markets model, assuming that the owner of cargo is 1, the shipping company is 2, the international container freight forwarding company is. At the same time, assuming that the quality of service provided by international container freight forwarding companies is s, the average quality is s. Because of the information asymmetry, international container freight forwarding companies, the shippers and the owners of cargo, have different degree information about the quality of services. Each assesses their utilities according to their own understanding of the service quality. (1) When the owner choice a particular freight forwarding company's service, their utility assessed by themselves is:u₁¹=U₁¹(n₂,s,s,p₁). Here n₂ is the number of the shippers that have cooperation relation with the selected freight forwarding company, p₁ is the price the owner is willing to pay. (2) When the owner choice a particular freight forwarding company's service, their utility assessed by international container freight forwarding companies is:u_i¹=U_i¹(n₂,s,s,p₂). Here p₂ is the price charged by the international container freight forwarding companies. (3)When the shipper choice a particular freight forwarding company's service, their utility assessed by themselves is:u₂²=U₂²(n₁,s,s,c₁). Here n₁ is the number of the owners that have cooperation relation with the selected freight forwarding company, c₁ is the commission the shipper is willing to pay. (4) When the shipper choice a particular freight forwarding company's service, their utility assessed by international container freight forwarding companies is:u_i²=U_i²(n₁,s,s,c₂). Here c₂ is the commission charged by international container freight forwarding companies. Under the condition of proper control of the parameters, the equilibrium solution of the two-sided markets is solved. Through the analysis of the equilibrium results, our conclusions are as follows: (1) if there were no offsetting mechanism, international container freight forwarding market tends to die out; (2) The more important of the service quality of international container freight agent (for owners and/or shipping company), the more prone to adverse selection; (3) if the information is not improved, the government cannot eliminate the adverse selection behavior of the international container freight agency market through the governance of social welfare maximization. In this paper, the reliability of the conclusions is proved by numerical simulation and market cases. This study provides a new way to study the adverse selection problem in the principal-agent market use the theory of two-sided markets.is:u²₂=U²₂(n₁,s,,c₁). Here n₁ is the number of the owners that have cooperation relation with the selected freight forwarding company, c₁ is the commission the shipper is willing to pay. (4) When the shipper choice a particular freight forwarding company's service, their utility assessed by international container freight forwarding companies is:u²_i=U²_i(n₁,s,,c₂). Here c₂ is the commission charged by international container freight forwarding companies. Under the condition of proper control of the parameters, the equilibrium solution of the two-sided markets is solved. Through the analysis of the equilibrium results, our conclusions are as follows: (1) if there were no offsetting mechanism, international container freight forwarding market tends to die out; (2) The more important of the service quality of international container freight agent (for owners and/or shipping company), the more prone to adverse selection; (3) if the information is not improved, the government cannot eliminate the adverse selection behavior of the international container freight agency market through the governance of social welfare maximization. In this paper, the reliability of the conclusions is proved by numerical simulation and market cases. This study provides a new way to study the adverse selection problem in the principal-agent market use the theory of two-sided markets.

Key words: container, freight agency, two-sided market, adverse selection