Hosseinian, S M; Farahpour, E and Carmichael, D G (2021) An optimum multiple outcomes sharing model with multiple risk-averse agents. Engineering, Construction and Architectural Management, 28(9), pp. 2788-2810. ISSN 0969-9988
Abstract
Purpose: The purpose of this paper is to propose an optimum form of incentive contracts with multiple outcomes and multiple agents. Design/methodology/approach: Utility theory and principal-agent theory provide the underlying basis for this paper. A sample of 60 practitioners from public organizations and private companies participated in an exercise to validate the proposed model. Findings: The paper shows that, in outcome sharing contracts, the contributions of agents toward outcomes are positively related, while agent effort costs, outcome uncertainty, outcome correlation and agent level of risk aversion are negatively related. The paper further demonstrates that outcome sharing is positively associated with the level of effort selected by the agents. Originality/value: Outcome sharing models might be used in construction contracts to encourage the agent to act in the interests of the principal. However, few studies have looked at contracts with multiple outcomes and multiple agents. This paper contributes to the current practice of contract management through simplifying the complex nature of multiple incentive contracts and providing theoretical guidance for multi arrangements.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | incentive contracts; multiple agents; multiple outcomes |
| Index terms: | exercise, construction contract, multiple outcomes, incentive contract, effort cost, utility theory, contract management, agent, practitioner, methodology |
| Subjects: | research methods, contract management, evaluation, economic theory, contract type, health behaviours and lifestyles, practitioner, contractual arrangements, financial and cost management |
| Topics: | Quality Management, Contract Administration, Health and Safety, Cost Management, Research Practice, Roles and Professions, Procurement |
| Descriptive scope: | 3 PCT |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here