Default Behaviors of Contractors under Surety Bond in Construction Industry Based on Evolutionary Game Model

Jing, Jiabao, Deng, Xiaomei, Maqbool, Rashid, Rashid, Yahya and Ashfaq, Saleha (2020) Default Behaviors of Contractors under Surety Bond in Construction Industry Based on Evolutionary Game Model. Sustainability, 12 (21). p. 9162. ISSN 2071-1050

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Official URL: https://doi.org/10.3390/su12219162

Abstract

In construction projects, some contractors will take default actions against the contracts to obtain maximum profits and damage the owners’ benefits as a result. In the construction markets where effective supervision is not performed well, contractors have more opportunities to default. Surety bonds were designed to solve the default problems and promote the sustainable development of the construction markets. This paper was proposed to explore the interactions between owners and contractors and investigate the influence of surety bonds (high penalty and low penalty) on the default behavior of contractors based on a static and dynamic evolutionary game analysis model. The results showed that applying the surety bond strategy is effective at decreasing the probability of the contractors’ default behavior when the credit system based on a surety bond system is well developed in the construction industry and the cost of the surety bond is low enough. Therefore, government strategies such as a better development of the credit system driven by surety bonds and the subsidies on surety bonds to reduce the cost can mitigate the contractors’ default behavior and keep the sustainability of the construction markets.

Item Type: Article
Uncontrolled Keywords: contractors, default, surety bond, evolutionary game, construction market
Subjects: G400 Computer Science
H100 General Engineering
K900 Others in Architecture, Building and Planning
N100 Business studies
Department: Faculties > Engineering and Environment > Mechanical and Construction Engineering
Depositing User: John Coen
Date Deposited: 18 Feb 2021 11:46
Last Modified: 31 May 2021 14:42
URI: http://nrl.northumbria.ac.uk/id/eprint/45471

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