Moral hazard in Inter-Firm Cooperation: a study of Building Information Modelling Implementation

Abstract

Active cooperation of building information modelling (BIM) implementation will benefit the society such as facilitating sustainable constructions. Given the government’s promotion of BIM and reported BIM’s profitability, individual firms in the market still stand aloof from using it. This paper attends issues of BIM implementation by exploring a model of benefits sharing where the BIM-involved cooperation has synergy effect (SE) and moral hazard problems play a key role. The model consists a client, a designer, and a contractor in a building project lifecycle. Despite the three parties’ cooperation maximizes BIM’s SE, they tend to take actions privately in a world of information asymmetry. A benefits-sharing model becomes crucial. Optimal solutions to ex-ante benefits sharing between the client and the designer are characterized, which indicate when BIM’s SE is relatively mild, as long as the designer is efficiently incented, he is more inclined to contribute BIM efforts compared with the client; when BIM’s SE is persuasive, both the client and the designer become more inclined to act positively towards BIM implementation. Given that the contractor’s behaviors that directly determine BIM’s SE are only observable ex-post, it is simultaneously crucial to provide efficient scheme of incentive-monitoring in the building stage.