Will Construction Contract Compensation Induce Incentive Failure?—A Moderation Model Based on Reference Point Effect of Contract

Jiandong Tang, Jie Li () and Ling Yan
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Jiandong Tang: Hebei University of Technology
Jie Li: Tianjin University of Technology
Ling Yan: Hebei University of Technology

A chapter in Proceedings of the 24th International Symposium on Advancement of Construction Management and Real Estate, 2021, pp 777-792 from Springer

Abstract: Abstract Contract compensation is an important means of post-incentive. However, “incentive failure” phenomenon often occurs and reduces the performance efficiency of the contract. Based on the contract reference point theory, the contractor’s choice of performance behaviors will take the key clause in the initial contract as a reference point. However, the existing studies ignore the impact of contract compensation on initial contract reference point effect. A mediated moderation model of contract reference point effect is constructed. Using questionnaire survey to tests the model. The results show that: (1) without considering the compensation after the contract, the risk liability clause in the initial contract positively promotes the contractor’s performance behaviors through the intermediary of fairness perception; (2) considering the contract compensation, the contract compensation will take the fairness perception as the intermediary to negatively adjust the relationship between the contract risk liability clauses and the contractor’s performance behaviors, leading to the incentive failure of the construction contract compensation. The research shows that the reference point effect should be solidified in the design of construction contract. At the same time, the execution of construction project contract should ensure that the contract compensation is consistent with the expectation. The research provides a theoretical reference for reducing transaction cost and improving the efficiency of contract ex-post performance.

Keywords: Reference point effect; Risk liability clause; Contract compensation; Fairness perceptions; Contractor’s performance behaviors (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-981-15-8892-1_56

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