Han, J and Huang, H (2023) Cooperative behavior, supervision, and contract choice in PPP projects: An evolutionary game theory approach incorporating an other-regarding preference. Journal of Construction Engineering and Management, 149(12): 04023140, ISSN 0733-9364
Abstract
Rigid and flexible contracts, both of which have advantages and disadvantages, are widely used in public-private partnership (PPP) projects. How to choose an appropriate contract type to improve the performance of PPP projects is an important issue that governments need to address. The literature has focused mainly on the strategy evolution of governments and private investors under rigid contracts but has not considered the influence of contract type (rigid versus flexible) on their strategy evolution. In this study, by incorporating an other-regarding preference, evolutionary game models under rigid and flexible contracts in PPP projects are established. We compare the government's supervision strategy and the private investor's cooperation strategy under these two types of contracts and summarize the applicable situations. Our research results show that the type of contract (rigid or flexible) will not affect the government's supervision strategy but will affect the cooperative strategy of the private investor. The applicable conditions of these two types of contracts are determined by profit sharing, the government's expectation of the project performance, and the discount rate as well as other factors. There is no cross-influence between the government and private investor's other-regarding preferences. The private investor's other-regarding preference is conducive to reducing some opportunistic behaviors that cause damage to social welfare and in promoting cooperative behavior. This paper contributes to the literature on PPP project contract design by providing the applicable conditions for rigid and flexible contracts as well as contract choice suggestions for project managers in PPP projects.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | evolutionary game theory; flexible contract; other-regarding preference; public-private partnership project; rigid contract |
| Index terms: | cooperation, preference, evolution, profit, strategy, cooperative behaviour, supervision, evolutionary game, project performance, opportunistic behaviour, partnership, project manager, investor |
| Subjects: | psychology, environmental science, economic analysis, profession, business, control systems, partnership management, sociology, economic theory, management, decision-making and reasoning, project management theory and practice |
| Topics: | Business Strategy, Project Management, Research Practice, Roles and Professions, Stakeholder Management, Sustainability, Organizational Design |
| Descriptive scope: | 3 PCT |
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