Modeling Interfirm Dependency: Game Theoretic Simulation to Examine the Holdup Problem in Project Networks
Publication: Journal of Construction Engineering and Management
Volume 137, Issue 4
Abstract
Subcontractor selection strategies used by contractors can significantly affect short-term project and long-term organizational success. Existing research on subcontractor selection strategy implicitly assumes that the evaluation of subcontractors depends on current conditions. We extend this perspective by integrating an agent-based simulation model with game theory to examine whether precontract partner selection strategies that do not consider subcontractor selection as a repeated game may lead to a version of the holdup problem. The holdup problem we investigate focuses on relationship-specific investments in learning after the introduction of an innovation or organizational change across a project network. A minimum total cost strategy may decelerate the rate of adaptation to an innovation or organizational change, thereby proving that the holdup problem can exist in project networks. The findings contribute to subcontractor selection strategy literature by simulating the impact of the holdup problem in project networks, distinguishing task interdependence as a moderating variable, and identifying that the minimum total cost strategy can be a suboptimal strategy for project networks adapting to systemic changes.
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Acknowledgments
The writers would like to thank Prof. Bogachan Celen for his invaluable comments and insights on the game theoretic modeling presented in this paper. This paper is based in part upon work supported by the National Science Foundation under Grant No. NSF0729253 and an Alfred P. Sloan Foundation Industry Studies Fellowship. Any opinions, findings, and conclusions or recommendations expressed in this paper are those of the writers and do not necessarily reflect the views of the National Science Foundation or the Alfred P. Sloan Foundation.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 137 • Issue 4 • April 2011
Pages: 284 - 293
Copyright
© 2011 American Society of Civil Engineers.
History
Received: Apr 23, 2009
Accepted: Sep 1, 2010
Published online: Sep 8, 2010
Published in print: Apr 1, 2011
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