Cui, L (2023) Collusion governance strategies under the construction supervision system in China. Construction Management and Economics, 41(9), pp. 724-738. ISSN 01446193
Abstract
The construction supervision system plays an essential role in promoting the development of Chinese construction industry. However, as the core of the supervision system, the supervisor may deviate from duty and collude with the contractor to seek more profits. This paper investigates optimal collusion governance strategies under the prevailing supervision system. This paper develops a game-theoretic framework including an owner, a supervisor and a contractor, wherein all players interact and pursue to maximize their self-profits. The collusion equilibrium and the collusion-proof equilibrium are explored. Since the game contains multiple rounds of strategic interactions, backward induction is applied to ensure subgame perfection. The results show that collusion makes the supervision system not always in the owner’s interests. For projects recommended to implement the supervision system, the boundary condition for the owner applying the supervision system is derived. For projects required mandatory supervision, the owner prefers to let the contractor and supervisor collude under certain conditions and guard against collusive behaviours otherwise. This study contributes to the theory by exploring the effects of covert collusion and optimal governance strategies. In addition, this study can assist the owner in better understanding and managing agent collusion to safeguard the project quality.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | China; collusion governance; game theory; project quality; supervision system |
| Index terms: | game theory, collusion, profit, strategy, duty, China, agent, owner, governance, boundary condition, supervision, interaction, construction industry, supervisor |
| Subjects: | practitioner, control systems, business, contractual role, decision models, economic analysis, Geography, tendering, management, structural engineering, behavioral psychology, industry analysis, sociology |
| Topics: | Engineering Principles, Research Practice, Project Management, Geographical Context, Business Strategy, Governance, Procurement, Stakeholder Management, Roles and Professions, Contract Administration |
| 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