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

Jiabao Jing, Xiaomei Deng, Rashid Maqbool, Yahya Rashid and Saleha Ashfaq
Additional contact information
Jiabao Jing: Department of Construction Management, Tsinghua University, Beijing 100084, China
Xiaomei Deng: Department of Construction Management, Tsinghua University, Beijing 100084, China
Rashid Maqbool: Department of Construction Management, Tsinghua University, Beijing 100084, China
Yahya Rashid: Department of Mechanical Engineering, Prince Sattam Bin Abdulaziz University, Al-Kharj 16273, Saudi Arabia
Saleha Ashfaq: School of Economics and Management, Fuzhou University, Fujian 350108, China

Sustainability, 2020, vol. 12, issue 21, 1-28

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.

Keywords: contractors; default; surety bond; evolutionary game; construction market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2071-1050/12/21/9162/pdf (application/pdf)
https://www.mdpi.com/2071-1050/12/21/9162/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:21:p:9162-:d:439780

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().