Double Moral Hazard and Risk-Sharing in Construction Projects

Shi, Lei; He, Yujia; Onishi, Masamitsu; Kobayashi, Kiyoshi

doi:10.1109/tem.2019.2938261

Cited by 24 publications

(19 citation statements)

References 42 publications

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“…It was shown that, with carefully chosen parameters, time-based and costsharing contracts can achieve optimal channel coordination. Shi et al [41] analyzed the double moral hazard caused by asymmetric information in construction projects, and designed an optimal risk-sharing scheme. It demonstrated that the risk-sharing scheme plays an important role in coordinating both parties to choose efficient strategies.…”

Section: Literature Reviewmentioning

confidence: 99%

Incentive schemes for centralized material planning and allocation with asymmetric information in construction supply chain

Wang

Chen

et al. 2024

IEEE Access

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In construction projects, a centralized management mode can effectively address the material management issues. Specifically, the Material Management Department (MMD) is responsible for material purchase, storage, and allocation based on the demand information reported by contractors. However, material demand are best observed by the contractors. They may manipulate the material takeoff (i.e. misrepresent the material demand) to increase the expected material allocation and avoid the project delay. Motivated by this situation, this paper focuses on the incentives to elicit truthful reporting from contractors. Cases of having prior information and no prior information about the material takeoff, as well as priority allocation and proportional allocation policies are considered. Under the case of having prior information, an incentive scheme is designed based on the Groves payment rule, while under the case of no prior information, two incentive schemes are designed based on the proper scoring rules. The comparison and numerical analysis show that the total three incentive schemes can induce the MMD to choose a systemoptimal inventory plan, as well as satisfy the participation constraints of contractors. Besides, the results also demonstrate that prior information is only the prerequisite for implementing the Groves incentive scheme and cannot improve the performance of the whole system in other aspects. INDEX TERMS Construction supply chain, material management, information asymmetry, incentive scheme. HUI LU received the B.Sc. degree in mechatronic engineering from Huazhong Agriculture University, and the Ph.D. degree in systems engineering from the

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Section: Literature Reviewmentioning

confidence: 99%

Incentive schemes for centralized material planning and allocation with asymmetric information in construction supply chain

Wang

Chen

et al. 2024

IEEE Access

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“…Parties usually seek evidence to justify events based on their interests referred in contract provisions. Such opportunistic approaches sometimes lead to conflicts that may jeopardize successful completion of projects [33] and hinder effective long-term relationships [34]. Therefore, acceptable degree of readability of construction contracts is essential from the initiation to the termination of construction projects.…”

Section: Determination Of Readability Risks In Construction Contractsmentioning

confidence: 99%

Causal Relationships of Readability Risks in Construction Contracts

Koç

Gürgün

2022

Teknik Dergi

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Issues related to readability risks in contracts could exacerbate conflict, claim and dispute occurrences in construction projects. Determination of root causes of readability risks by defining casual relationships in construction contracts is essential to improve contract documentation and enable successful risk management. This paper aims to differentiate net causes from net effect factors of readability risks in construction contracts. Most significant readability risks in construction contracts were analyzed using fuzzy decision-making trial and evaluation laboratory (DEMATEL) method, which is known for its wide implementation in similar problems. Root cause degree (RCD) diagram was drawn to illustrate the differentiation of these factors by adopting maximum mean de-entropy (MMDE) algorithm. Analysis results indicated that poor grammar use, legal terminology, visual representation, and negative language were the major underlying cause factors; while lengthy document, use of abbreviations, scope complexity, controversial uses, repetitions, and ambiguous words were the net effect factors. The results are expected to improve readability of contract documents, which would contribute to more effective risk management and better allocation of project resources.

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“…Schmitz found that when the principal has a limited budget separation can be optimal [41]. Shi et al proposed an optimal sharing ratio for risk influenced by the conduct of both the owner and the contractor [42].…”

Section: B Incentive Mechanism Literaturementioning

confidence: 99%

An Incentive Analysis of Availability Payment Mechanism in PPP Projects

Shi

2020

IEEE Access

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This study aims to investigate the incentive mechanism of different availability payment methods applied in Public Private Partnership (PPP) contracts. We present a basic model in a multitask environment in which a risk-averse private contractor chooses two types of noncontractible efforts: one is unproductive, in the sense that it saves building cost but sacrifices social benefits; the other one is productive, as it reduces operating cost without social loss. We find that the PPP contract using separate charges for availability and performance is more desirable than using single unitary charge if the government can detect the social loss cause by unproductive effort. However, the latter brings about more social welfare over the former if the social loss is not observable to the government and the observable value of benefit-cost ratio of the unproductive effort is relatively larger than the benefit-cost ratio of the productive effort.

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Double Moral Hazard and Risk-Sharing in Construction Projects

Cited by 24 publications

References 42 publications

Incentive schemes for centralized material planning and allocation with asymmetric information in construction supply chain

Incentive schemes for centralized material planning and allocation with asymmetric information in construction supply chain

Causal Relationships of Readability Risks in Construction Contracts

An Incentive Analysis of Availability Payment Mechanism in PPP Projects

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