Chang, C Y and Qian, Y (2015) An econometric analysis of holdup problems in construction projects. Journal of Construction Engineering and Management, 141(6): 04015004, ISSN 0733-9364
Abstract
The holdup problem plays a central role in explaining governance choices in general and project delivery system selection in particular. This problem arises because of the asymmetrical distribution of quasi-rents between two trading parties. To put this theoretical proposition to a direct test, this research first uses the Nash bargaining model to derive a hypothesis that links quasi-rent differences to the excess profit margin that the contractor can achieve in ex post negotiations, and then collates a data set of 62 change-order cases to enable the hypothesis to be tested econometrically. The corroboration of the hypothesis lends empirical support to the core argument used in the analysis of construction holdup problems. This finding brings to the foreground the significance of recognizing that change orders might be attributed to the owner's strategic choice. Ignorance of this factor would bias the coefficient estimation in the empirical analysis of change orders.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bargaining power; change orders; contracting; holdup; quasi-rent; transaction cost |
| Index terms: | owner, holdup, governance, construction project, change order, bargaining, profit, project delivery, negotiation, transaction cost, estimation, bias, econometric |
| Subjects: | economic analysis, production management, sociology, business, contractual condition, probability and distributions, financial analysis, economics, project delivery, financial and cost management, conflict resolution |
| Topics: | Cost Management, Stakeholder Management, Project Management, Procurement, Supply Chain Management, Research Practice, Contract Administration, Governance, Business Strategy |
| Descriptive scope: | 4 PCTA |
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