The Design Of Project Schedule And Quality Contract Under Asymmetric Information

Schedule and quality of construction projects are important to the healthydevelopment of the whole society, once the unqualified construction projects ariseproblems, the consequences are very serious. Moreover, timely completion ofsome basic facilities such as roads, bridges and others often determine the e-conomic development of a region. Therefore, it has very important realisticmeanings to design the contract to ensure the project progress and quality.The application of contract theory is used to standard contractor behaviorunder asymmetric information, and ensure the project schedule and quality. Onthis issue, the owner and the contractor are principal-agent relationship, wherethe owner is principal and the contractor is agent. Management ability on theschedule and quality of the contractor is difcult to be observed. Therefore,the owner hopes to design a contract to incentive the contractor in accordancewith the owner’s demand to approach to the construction ensuring the projectschedule and quality.First, this dissertation studies a project contract design problem, in whichthe contractor’s management quality is private information and continuous whichplays a key role in the project’s schedule. Furthermore, linear two-part pricingcontract is employed, where the owner pays the contractor a fixed payment atfirst, then pay it a changed payment according to the real project schedule.Then, a contract model is developed with the purpose of maximizing the own-er’s expected payof and its equivalent form is obtained. The optimal contractis obtained. The optimal contract demonstrates that the optimal constructionproject schedule under asymmetric information is lower than it under symmetricinformation.Besides, it explores a contract design of project quality, where pricing andwarranty are simultaneously employed in the contract. Then, a continuousproject contract model is developed with the purpose of maximizing the own-er’s expected payof and its equivalent form is obtained. The optimal contract demonstrates that the optimal construction project schedule under asymmetricinformation is lower than that of under symmetric information in the case ofsubstitute, while in the case of complements, they are the same.