RESEARCH ARTICLE
Research on Preventing Moral Hazard of Construction Project Based on Information Asymmetries
Pengcheng Xiang*, 1, 2, Jinan Wang1
Article Information
Identifiers and Pagination:
Year: 2014Volume: 8
First Page: 468
Last Page: 475
Publisher ID: TOBCTJ-8-468
DOI: 10.2174/1874836801408010468
Article History:
Received Date: 16/9/2014Revision Received Date: 23/12/2014
Acceptance Date: 31/12/2014
Electronic publication date: 31/12/2014
Collection year: 2014
open-access license: This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International Public License (CC-BY 4.0), a copy of which is available at: https://creativecommons.org/licenses/by/4.0/legalcode. This license permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Abstract
There exists the problem of information asymmetry among the participants in construction project who form economic partnerships one another. Information asymmetries among the participants in construction project places a premium on adverse selection and moral hazard. The major objective of this article is to implement the mechanisms of incentive and monitoring under the framework of principal-agent theory in analysis of moral hazard of construction project and to explore how to prevent it. The optimization model of incentive and monitoring under the circumstance of asymmetric information will be founded on the basis of the analysis of the effect of incentive and monitoring mechanisms in the principal- agent relationship. It indicates that reliability of information can be increased when bringing incentive and monitoring mechanisms into reward contract, which can prevent moral hazard of construction project.