Mitigation Measures for Information Asymmetry between Participants in Construction Projects: The Impact of Trust

Ivona Ivić () and Anita Cerić
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Ivona Ivić: Faculty of Civil Engineering, University of Zagreb, 10000 Zagreb, Croatia
Anita Cerić: Faculty of Civil Engineering, University of Zagreb, 10000 Zagreb, Croatia

Sustainability, 2024, vol. 16, issue 16, 1-27

Abstract: Sustainability requirements pose complex challenges for the construction industry, requiring adaptation strategies, innovative solutions, and collaboration between stakeholders to build resilient structures for the future. Nevertheless, effective collaboration between stakeholders is hindered by information asymmetry, which can produce disputes, endanger honest communication between the participants, and in the long term, negatively affect industrial productivity. To improve the sustainability of construction businesses and construction projects, there is a need for the implementation of mitigation measures for information asymmetry risks. This study presents possible mitigation measures for information asymmetry between clients and contractors in the construction industry. Mitigation measures were identified through a literature review and semi-structured interviews with industry professionals. Furthermore, a questionnaire was designed and employed to prioritize mitigation measures and explore their utility for mitigating three types of risks: adverse selection, moral hazard, and hold-up. The results of this study indicate that building trust, regular supervision and monitoring of work, thorough verification of bidders, and fair distribution of risks between the client and the contractor have the most utility in mitigating information asymmetry in construction projects. The practical contribution of this research includes defining the most useful measures to mitigate risks caused by information asymmetry. Project managers can apply the results of this research for more successful achievement of their project goals. Implementing effective risk management strategies, such as building trust between stakeholders, can help mitigate the impacts of unforeseen events and build resilience in construction projects.

Keywords: information asymmetry; risk management; mitigation measures; trust (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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