Abstract: Considering the three major factors in the construction of PPP infrastructure projects,i.e.the optimal effort level of private sector,the supervision of public sector and the expected profit of relational contract,from the dynamic point of view,we apply the principal-agent theory to design a two-stage cooperation incentive contract between public and private sectors based on Holmstrom and Tirole incentive model.By analyzing the optimal effort level and supervision of the incentive factor in each stage,we conclude the effect of the relevant factor s and the dynamic interaction of two stages.We advance the contin gentincentive mechanism by comparing the external supervision and intrinsic incentive,so as to provide some guidance to the design of effective incentive contract between public and private sectors in PPP projects.

Key words: public-private partnership, infrastructure projects, dynamic, incentive, monitor