Game Theory-Based Framework for Analyzing the Collaborative Dynamic of Tacit Knowledge Sharing and the Choice of Procurement and Contract Types in Mega Construction Projects

Abstract

In construction projects, owners’ and contractors’ decisions as to whether or not share their tacit knowledge transparently with each other determines the choice of project delivery and contracting methods and their collaborative behaviors in the projects. The dynamic of collaboration is a complex one and is often influenced by the other player’s intent to collaborate. This paper proposes a quantitative framework using game theory to analyze the collaborative dynamic interplay in construction projects. The framework demonstrates that when an owner’s and a contractor’s knowledge leveragability (L) is very high and synergy (S) is enhanced as a result of knowledge sharing in complex construction projects, the Nash equilibrium state lies beneath the Pareto frontier. This means that sharing tacit knowledge transparently about budgets by choosing the best value procurement with GMP or IPD contracts can promote collaboration and provide better payoffs to both stakeholders than not sharing the knowledge by choosing the Design–Bid–Build method using a low-bid procurement in conjunction with a fixed-price contract. This research contributes to the body of knowledge by proposing a theoretical framework that enables both owners and contractors to understand the economics of collaboration in the context of complex projects.