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An Econometric Analysis of Holdup Problems in Construction Projects

Chang, C; Qian, Y; (2015) An Econometric Analysis of Holdup Problems in Construction Projects. Journal of Construction Engineering and Management (accepted) 10.1061/(ASCE)CO.1943-7862.0000957. Green open access

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Abstract

Holdup problems play a central role in explaining governance choices in general and project governance selection in particular. However, empirical evidence has not progressed on par with the growth of theoretical contributions. This research applies the Nash bargaining model to derive a hypothesis linking quasi rent difference and the excess profit margin that the contractor can achieve in ex post negotiations, and puts it to test using econometric models. The corroboration of the hypothesis lends direct empirical support to the core argument used in the analysis of construction holdup problems. This finding brings to the foreground that change orders might arise thanks to the owner’s strategic choice. Ignorance of this factor would bias the coefficient estimation in the empirical analysis of change orders.

Type: Article
Title: An Econometric Analysis of Holdup Problems in Construction Projects
Open access status: An open access version is available from UCL Discovery
DOI: 10.1061/(ASCE)CO.1943-7862.0000957
Publisher version: http://dx.doi.org/10.1061/(ASCE)CO.1943-7862.00009...
Additional information: This work is made available under the terms of the Creative Commons Attribution 4.0 International license, http://creativecommons.org/licenses/by/4.0/.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
URI: https://discovery.ucl.ac.uk/id/eprint/1429966
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