Moral Risk Analysis of Construction Project Cost Management Incentive Mechanism

Abstract:

Cost management of construction project has experienced business accounting type, and control type management stage. But as the construction market becoming more mature, and the market-based products more competitive, now the cost management of construction project enters into the value creation management stage. If the construction enterprises only focus on target cost and responsibility cost management, it is difficult to carry out value creation effectively. This paper discusses how to adopt active incentive mechanism to encourage the agent to play initiative better and create more value under the circumstance of moral risk, determine the expected utility maximization parameters for construction project through the model optimization. This study found that incentive mechanism not only can make the agent more hard-working, but also is beneficial to improving the quantity of construction project. Finally, by providing numerical examples and analyzing the influence of variations of relevant parameters in incentive model, this paper has got comparatively satisfying results.

• Periodical: Applied Mechanics and Materials (Volumes 174-177)
• Pages: 3228-3234
• DOI: https://doi.org/10.4028/www.scientific.net/AMM.174-177.3228
• Online since: May 2012
• Authors: Yi Yong Lin, You Song Wang, Jing Kuang Liu
• Keywords: Cost Management, Entrusted Agency, Incentive Mechanism, Moral Risk

References

[1] ZHANG Wei-ying.Game Theory and the Economics of Information. pp.238-239.Shanghai People's Publishing House(1997)

[2] Wang Linfeng. Inner Mongolia Science Technology & Economy. Vol. 04 (2006), pp.78-79 (in Chinese).

[3] Bengt Holmstrom. European Economic Review. Vol. 17 (1982) , pp.127-148

[4] Kim S K, Wang S S. Journal of Economic Theory. Vol. 82 (1998) , pp.342-378.

[3] Mirrlees J A. Review of Economic Studies. Vol. 66 (1999) , pp.3-21

[6] SUN Youfa. The reciprocal of a normal distribution and the Securities gains abnormity of reason . Decision-making and statistical, Vol. 05 (2007), pp.21-22.

[7] Liu Hai-tao, WEI Ru-xiang. Research on Target Cost Incentive Pricing based on Principal-agent Theory. 2010 Interactional Conference on Future Information Technology and Management Engineering. Beijing：IEEE, pp.266-269.

DOI: 10.1109/fitme.2010.5655602

[8] LI Li-jun， HUANG Xiao-yuan. Journal of Northeastem University (Natural Science), Vol. 10, (2003) , pp.937-939.

[9] Prajit K.Dutta. Strategies and Game: Theory and Practice. MIT press (1999)

[10] Qin Xuan. Engineering Science, Vol. 09 (2007), pp.45-49. ( in Chinese)

[11] Carsten Homburg. Accounting Research, Vol. 12, (2001).

[12] LU Shao-kai1,HE Xian-fen2,and YAO Yan-fei. Journal of Shenzhen University Science and Engineering, Vol. 25, (2008) , pp.55-60. ( in Chinese)

[13] Jon Broome, John Perry. International Journal of Project Management, Vol. 20, (2002) , pp.59-66

[14] Weng Dongfeng，He Zhouting. China Civil Engineering Joural, Vol. 43, (2010) , pp.139-143