Overcoming information asymmetry in the construction industry based on open and closed contractor activity data

Abstract

The purpose of the research is to find measures to reduce information asymmetry which significantly affects the relationship between customer and contractor, leading to higher prices for construction work and enhanced opportunism. Information asymmetry can make contractor and customer move away from direct contractual relations to more and more costly ways of interaction: legal, law enforcement and ethical. In the long run, the most effective level of interaction is ethical, as it significantly reduces information asymmetry as well as attendant costs. The article proposes two approaches to analyse asymmetry of contractor's information: in the situation of limited access to internal information of a construction company and in the situation of maximum access to information of the activities of construction company's individual departments. In the first approach, an assessment of price discrimination and changes in the cost of construction due to a deliberate deterioration in its quality is used. In the second approach, a set of indicators is considered, grouped by the functional levels of the contractor: physical, procurement, economic, technological and design.