Zhong, B; Zhong, W; Wu, H; Guan, Q; Tang, B and M.e Sepasgozar, S (2025) Strategic impacts of blockchain adoption on contractor decisions in competitive construction markets: A game-theoretic approach. Journal of Construction Engineering and Management, 151(12): 04025203, ISSN 0733-9364
Abstract
Blockchain applications have obtained extensive attention in the construction industry. However, little research has investigated the effects of blockchain adoption on construction firms' operation strategies. This paper used a game theoretic model to investigate how blockchain technology influences contractors' optimal pricing and quality effort decisions in a competitive market. Our analyses revealed that when the blockchain operation cost is high, the contractor using blockchains will improve its quality efforts and set a higher price. The competitor without blockchains behaves the opposite. In this case, market shares and profits of the contractor with blockchains increase, indicating that blockchain adoption can increase the owners' perceived value and willingness to pay. More importantly, this finding indicated that blockchain adoption enhances construction service differentiation, and owners prefer cooperation with contractors capable of delivering high-quality services rather than simply selecting the lowest bidder. We found that adopting blockchains does not always guarantee higher-quality results. Contractors using blockchains will reduce quality efforts but set higher prices when the blockchain operation costs are low. Interestingly, blockchain adoption will increase contractors' quality efforts, construction service prices, and profits when the blockchain operation costs are high. This study contributes to understanding the strategic impacts of blockchain adoption in a competitive construction market. The findings also provide significant implications for industrial managers and policymakers on benefitting from blockchain technology adoption.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | blockchain adoption; construction quality; contractor strategy; game theory; quality effort |
| Index terms: | guarantee, willingness to pay, manager, profit, construction firm, game theory, strategy, construction quality, differentiation, cooperation, pricing, market share, owner, bidder, technology adoption, blockchain, construction market, construction industry |
| Subjects: | market analysis, quality assurance, psychology, economic analysis, innovation and technology management, bidding, organization, practitioner, sociology, price determination, industry analysis, management, contract structure, decision models, computing systems |
| Topics: | Digital Applications, Organizational Design, Business Strategy, Research Practice, Roles and Professions, Stakeholder Management, Quality Management, Engineering Principles, 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