The impact of decision criteria on deadline-based incentive contracts in project management

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• 作者：Jiao Wang ; Kai Yang ; Ruiqing Zhao
• 关键词：Uncertainty theory ; Project management ; Incentive contract ; Asymmetric information ; Decision criterion
• 刊名：Journal of Intelligent Manufacturing
• 出版年：2017
• 出版时间：March 2017
• 年：2017
• 卷：28
• 期：3
• 页码：643-655
• 全文大小：
• 刊物类别：Business and Economics
• 刊物主题：Production; Manufacturing, Machines, Tools; Control, Robotics, Mechatronics;
• 出版者：Springer US
• ISSN：1572-8145
• 卷排序：28

文摘

This paper investigates the impact of decision criteria on incentives in a project management setting, where a project manager operates a project consisting of two tasks performed sequentially by two different subcontractors. The completion time is characterized as an uncertain variable, which depends on the subcontractor’s unobservable effort of each task. Within the framework of uncertainty theory, four classes of uncertain principal agent models are presented under the expected value criterion and the critical value criterion. According to the structural characteristics, each model can be decomposed into two equivalent sub-models, which can be solved to obtain the optimal deadline-based incentive contracts via a two-step optimization method. Further, the interconnections among these contracts are discussed. It’s demonstrated that the optimal deadline-based incentive contract depends on the confidence level of the party (either the project manager or the subcontractor) who adopts the critical value criterion. Meanwhile, the more conservative the subcontractor is, the higher the incentive coefficients will be. And the more conservative the project manager is, the lower the incentive coefficients will be. Finally, given some special confidence levels, it’s interesting to find that the four models can be equivalent.