Research On The Moral Hazard Model In The Mode Of Lump-Sum Contracting

The cooperation extent and efficiency among parts of a construction project largely determine whether the project will be successful or not. However, actually, there exist many problems of cooperation deficiency in both degree and efficiency, many of which can be classified into the moral hazard problem. In the mode of lump-sum contracting, the client, contractor and subcontractors form a principal-agent chain, which comprises of two layers of principal-agent relationship. As the agents, the contractor and subcontractors may both expose themselves to moral hazard problems. However, at present, many of related literatures mainly focus on moral hazard problem consisting in one-layer principal-agent relationship. Therefore, it makes sense to devise a multi-layer moral hazard model, through which the principal of lump-sum contracting can be guided to constrain the moral hazard problem of the agents. In addition, this model can contribute to improve the cooperation extent and efficiency among these three parts, and thus will enhance the performance of the construction project. In sum, the research of this paper has theoretical and practical importance. The main work of this paper is as follows:1. Based on specific summary and analysis of related realistic backgrounds as well as domestic and foreign literatures, points where further research can be made are showed, they are also where the thesis lies.2. According to the simplified situation of "one client, one general contractor and one subcontractor" in the mode of lump-sum contracting, a common moral hazard model is primarily devised, whose main coherences and distinctions with the general moral hazard problem consisting in one-layer principal-agent relationship are analyzed. Subsequently, the variables of the general model are parameterized, a variable model is then found, whose main coherences and distinctions with the general moral hazard variable modal consisting in one-layer principal-agent relationship are also analyzed.3. Based on the variable model deduced in Chapter 2, according to the extended situation of " one client, one supervisor, one general contractor and several subcontractors" in the mode of lump-sum contracting, an extended moral hazard model with multi-objectives on comprehensive stimulation is found, which can reflect not only different priorities of each objective, but also uncertain output. Analysis on the solution of the model is also deliberated on.4. The application methods of the extended moral hazard model are elaborated. It's further illustrated by an example, through which, this model's validity and operability are verified. Quantitative analysis is made also based on the example, i.e. (1) How changes in the supervisor's work performance variable influence the variables of the contractor and subcontractors'commitment and the stimulation intensity coefficient got by the subcontractors. (2) How changes in subcontractor's absolute risk adverse index influence the variables of subcontractors'commitment and the stimulation intensity coefficient got by the subcontractors. (3) How changes in the output variance of the amount of incentive funds according to the subcontractor's comprehensive performance influence the variables of subcontractors'commitment and the stimulation intensity coefficient got by the subcontractors. Last but not least, recommendations on solving schemes are respectively given to architecture industry, the client, and the general contractor.The research of this paper can give certain references to the construction project practice involving two-layer principal-agent relationship.