Moral Risk Analysis of Construction Project Cost Management Incentive Mechanism

Abstract

Cost management of construction project has experienced business accounting type, and control type management stage. But as the construction market becoming more mature, and the market-based products more competitive, now the cost management of construction project enters into the value creation management stage. If the construction enterprises only focus on target cost and responsibility cost management, it is difficult to carry out value creation effectively. This paper discusses how to adopt active incentive mechanism to encourage the agent to play initiative better and create more value under the circumstance of moral risk, determine the expected utility maximization parameters for construction project through the model optimization. This study found that incentive mechanism not only can make the agent more hard-working, but also is beneficial to improving the quantity of construction project. Finally, by providing numerical examples and analyzing the influence of variations of relevant parameters in incentive model, this paper has got comparatively satisfying results.