Effects of Contractors’ Risk Attitude on Competition in Construction
Publication: Journal of Construction Engineering and Management
Volume 137, Issue 4
Abstract
Competitive bidding is the major mechanism of competition. Bidding is risky because the actual cost of the job is unknown. Thus, the bid should be high enough to make a profit but low enough to win the bidding. The result of competition depends on the competitor’s risk-taking behaviors, which are affected by the organization’s risk attitudes. A contractor’s risk-taking is an essential element of the construction business. The current study explores the domain of competition at the aggregate market level. An evolutionary simulation model was developed to investigate the effects of risk attitude on a contractor’s success and on the market structure. The analysis accounts for different risk-taking behaviors in competition, different performances by contractors, corresponding organizational changes, and aggregate patterns in the form of the market structure. The study finds that risk attitude is a competitive characteristic of contractors. The results provide new insight on competition in the market place, and explanations are given for a contractor’s competitive success.
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Acknowledgments
The writers express their appreciation to the J.L. “Corky” Frank/Marathon Ashland Petroleum LLC Chair in Engineering Project Management at Texas A&M University for partial support of this research.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 137 • Issue 4 • April 2011
Pages: 275 - 283
Copyright
© 2011 American Society of Civil Engineers.
History
Received: Oct 5, 2009
Accepted: Aug 23, 2010
Published online: Sep 2, 2010
Published in print: Apr 1, 2011
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