An economic game theory model of subcontractor resource allocation behaviour

Abstract

Periodic review and adjustment of resource allocations to construction projects is critical for subcontractors to maintain profitability under traditional unit price or lump sum contracts. Project managers strive to control subcontractors in an effort to meet budgets and schedules; subcontractors often work on multiple projects simultaneously and strive independently to allocate resources to those projects where they perceive that they will bring maximum utility. An economic game theory model is proposed as a foundation for understanding the behaviour of subcontractors in allocating resources to projects. The model describes the influence of the degree of reliability of the planned schedule on subcontractors' and project managers' behaviours under traditional unit price contracting. Unreliable plans undermine efforts to promote cooperative behaviour.