Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Evaluating the Pricing Strategy for Change Orders between General Contractors and Subcontractors Using ET-SD Model

Version 1 : Received: 7 March 2020 / Approved: 8 March 2020 / Online: 8 March 2020 (01:19:49 CET)

How to cite: Lin, C.; Lai, Y.C. Evaluating the Pricing Strategy for Change Orders between General Contractors and Subcontractors Using ET-SD Model. Preprints 2020, 2020030126 (doi: 10.20944/preprints202003.0126.v1). Lin, C.; Lai, Y.C. Evaluating the Pricing Strategy for Change Orders between General Contractors and Subcontractors Using ET-SD Model. Preprints 2020, 2020030126 (doi: 10.20944/preprints202003.0126.v1).

Abstract

Change orders have received considerable attention from researchers thus far, but none have considered pricing strategies of change orders through the interaction between general contractors and subcontractors. Previous studies found that contractors’ opportunistic bidding considering beyond-contractual reward (BCR) in the execution stage can be reduced by improving the construction management system and strengthening the supervision of contractors’ performance. However, the BCR remains in ecology of construction engineering. This study proposes an integrated evolutionary game theory-system dynamics model (ET-SD model) and simulates the pricing strategy of change orders between general contractors and subcontractors to explore the root cause of BCR phenomenon. Sensitivity analysis on the evolutionary dynamics of payoff is explored. Results reveal that change orders with BCR maintain Nash equilibrium and evolutionary stable strategy (ESS) unless changing the payoff structure between general and subcontractors’ pricing strategies. This study presents important managerial insights from the evolutionary game perspectives, nature of change orders, and payoff of the alternative.

Subject Areas

change order; pricing; game theory; evolutionary stable strategy (ESS); system dynamics

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