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An economic game theory model of subcontractor resource allocation behaviour

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  • Rafael Sacks
  • Michael Harel

Abstract

Periodic review and adjustment of resource allocations to construction projects is critical for subcontractors to maintain profitability under traditional unit price or lump sum contracts. Project managers strive to control subcontractors in an effort to meet budgets and schedules; subcontractors often work on multiple projects simultaneously and strive independently to allocate resources to those projects where they perceive that they will bring maximum utility. An economic game theory model is proposed as a foundation for understanding the behaviour of subcontractors in allocating resources to projects. The model describes the influence of the degree of reliability of the planned schedule on subcontractors' and project managers' behaviours under traditional unit price contracting. Unreliable plans undermine efforts to promote cooperative behaviour.

Suggested Citation

  • Rafael Sacks & Michael Harel, 2006. "An economic game theory model of subcontractor resource allocation behaviour," Construction Management and Economics, Taylor & Francis Journals, vol. 24(8), pages 869-881.
    • Handle: RePEc:taf:conmgt:v:24:y:2006:i:8:p:869-881
    DOI: 10.1080/01446190600631856
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    References listed on IDEAS

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    1. Richard H. Thaler & Amos Tversky & Daniel Kahneman & Alan Schwartz, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 647-661.
    2. Eccles, Robert G., 1981. "The quasifirm in the construction industry," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 335-357, December.
    3. Awad Hanna & Jeffrey Russell & Paul Vandenberg, 1999. "The impact of change orders on mechanical construction labour efficiency," Construction Management and Economics, Taylor & Francis Journals, vol. 17(6), pages 721-730.
    4. Mike Bresnen & Nick Marshall, 2000. "Partnering in construction: a critical review of issues, problems and dilemmas," Construction Management and Economics, Taylor & Francis Journals, vol. 18(2), pages 229-237.
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    Citations

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    Cited by:

    1. Beata Grzyl & Magdalena Apollo & Adam Kristowski, 2019. "Application of Game Theory to Conflict Management in a Construction Contract," Sustainability, MDPI, vol. 11(7), pages 1-12, April.
    2. Jean-Charles Fiolet & Carl Haas & Keith Hipel, 2016. "Risk-chasing behaviour in on-site construction decisions," Construction Management and Economics, Taylor & Francis Journals, vol. 34(12), pages 845-858, December.
    3. Shi Chen & Hau Lee, 2017. "Incentive Alignment and Coordination of Project Supply Chains," Management Science, INFORMS, vol. 63(4), pages 1011-1025, April.
    4. Talebiyan, Hesam & Dueñas-Osorio, Leonardo, 2023. "Auctions for resource allocation and decentralized restoration of interdependent networks," Reliability Engineering and System Safety, Elsevier, vol. 237(C).
    5. Woong-Gi Kim & Namhyuk Ham & Jae-Jun Kim, 2021. "Enhanced Subcontractors Allocation for Apartment Construction Project Applying Conceptual 4D Digital Twin Framework," Sustainability, MDPI, vol. 13(21), pages 1-21, October.
    6. Kerkhove, L.P. & Vanhoucke, M., 2016. "Incentive contract design for projects: The owner׳s perspective," Omega, Elsevier, vol. 62(C), pages 93-114.
    7. Mahendra Piraveenan, 2019. "Applications of Game Theory in Project Management: A Structured Review and Analysis," Mathematics, MDPI, vol. 7(9), pages 1-31, September.

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