Application of Game Theory to Conflict Management in a Construction Contract

Recently there has been growing interest in the application of game theory (GT) to solve many diverse problems in the field of construction, including i.a.: tender preparation, selection of a contractor for construction works, negotiating terms and conditions of cooperation of the parties to the contract, analysis and modeling of investment risk. In the authors opinion, the use of GT by general contractor (GC) of construction works to indicate the best strategy leading to winning court proceedings in a situation of conflict with investor (IN), so far has not been the subject of research. Taking into account the above, the aim of the presented paper is to indicate the optimal strategy from the GC point of view in the conflict situation with IN. The article presents a list of the most common causes of conflicts between parties of the construction works' contract, defines the background of the problem and the cause of the dispute, and on its basis, the authors generate the theoretical model of the game. Based on the analyzed game model, expected payoffs for players were calculated and the probability border value at which GC should apply the indicated strategy determined. The results of the study show that in the case when the probability of issuing a judgment favorable for GC is at least equal to 69.23%, it is justified to use an aggressive strategy. The analysis also confirms that from the financial perspective, litigation in most cases of conflicts in the area of construction should be the last choice.