Dissertation > Economic > Industrial economy > China Industrial Economy > Industrial sector economy

The Information Asymmetry between Owners and Contactors about Construction Project

Author LiJinLi
Tutor GaoPing
School Dongbei University of Finance
Course Technology Economics and Management
Keywords Asymmetric information Consequence Formation mechanism Solutions
CLC F426.92
Type Master's thesis
Year 2011
Downloads 108
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With the rapid development of China’s economic and the acceleration of our urbanization, the construction industry in the national economy becomes more and more important. However, the construction industry is facing some serious challenges:The management about qualification of Construction companies is not very good, many important buildings are working by those unqualified construction team:supervision units often accepting contractor’s bribes, dereliction of duty in the course of project supervision, protecting the contractor’s illegal behavior; owners often take their advantages of a buyer’s market, so that the contractor signed the contract to pay a large deposit before the construction process as well as arrear payment, etc., resulting in contractor cash flow difficulties. These problems have seriously hindered the further development of the construction market, should be solved.Those questions In the final analysis due to the information asymmetry in construction market, so that the owners chose unqualified contractors and supervision units, so owners in the construction process can not make accurate judgments about the contractor’s performance or can not know whether the supervision units is diligence; the same time, due to information asymmetry, supervision units and contractors unsure that they choose the well-funded, reputable owners. Therefore, the study for the problem of asymmetric information in construction market is significant, especially between owners and contractors.The information asymmetry between owners and contractors is caused by several factors:the strictly economic principal-agent relationship between owners and contractors;as economic man. they will use every chance to take opportunistic behavior to seeking the maximize benefits; owners want to know the contractor’s information, monitoring their actions, they need to pay high fees, and transaction costs.However, full information symmetry is impossible and is not economy; government agencies and related departments for the construction market in the supervision and punishment of abuses is not enough, resulting low-cost illegal. High compliance costs.To solve the problem of information asymmetry between owners and contractors, we should deep the institutional building of construction market. improve the trading mechanism. Therefore, we need to strength the legal system construction:to form effective competition environment:to foster fair and standard agency; to establish information database that enhance information transfer and sharing. Second, participates in the construction market should do its main efforts. up from the micro level to create a good working relationship. Thus, in the procurement.of construction services should choose the appropriate procurement method, and establish partnering management mode; designing a good contract is an effective way to avoid controversy.This paper describes the serious consequences about information asymmetry between owners and contractors, then analyze the formation mechanism of asymmetric information problems the institutional economics and economic theory. propose some solutions:perfecting the construction market system. and improve the trading mechanism:choose the appropriate method of procurement and establish partnership management model, perfect contract.The structure of the article as follows:PartⅠ:descript the current about construction market, the essence of the problem is information asymmetry; elaborate the theory of asymmetric information on domestic and international research history.PartⅡ:analyze the problem of asymmetric information, including the concept of asymmetric information and historical roots, in the information needs about construction project of owners and contractors, and the forms of asymmetric information.PartⅢ:the beginning of the most important question:analyze the consequences of information asymmetry between owners and contractors:adverse selection and moral hazard.PartⅣ:Using information economic theory and institutional economics to analyze the formation mechanism of information asymmetric, this section is the important part of the article.PartⅤ:This section is the most important part of the article, give some solutions from improving the construction market environment to the efforts of participants, that respectively, from the macro and micro perspective.PartⅥ:This section is the conclusion of the article, summarize the theoretical basis for the formation of asymmetric information and the measures, point out the inadequacies of the study.

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