Abstract: A three-tier principal-agent relational hierarchy is built within the authority concerned, supervisor and the enterprise discharging pollutants, i.e. within principal, agent and the third party. To solve the problem of principal-agent relation in pollutant discharging under the supervision of authority during the control of externality, a model is developed. In it, authority as principal who judges that enterprise is allowed to or not to collude with supervisor in according to the information provided by supervisor for pollutant discharge whether supervisor is integrity or not with relevant cost also calculated. Thus, an optimal range is available to authority for whether collusion between supervisor and enterprise is allowed or not, and simulation computation shows correspondingly conclusion.