Paper Info
Title
The impact of decision criteria on deadline-based incentive contracts in project management
Abstract
This paper investigates the impact of decision criteria on incentives in a project management setting, where a project manager operates a project consisting of two tasks performed sequentially by two different subcontractors. The completion time is characterized as an uncertain variable, which depends on the subcontractor's unobservable effort of each task. Within the framework of uncertainty theory, four classes of uncertain principal agent models are presented under the expected value criterion and the critical value criterion. According to the structural characteristics, each model can be decomposed into two equivalent sub-models, which can be solved to obtain the optimal deadline-based incentive contracts via a two-step optimization method. Further, the interconnections among these contracts are discussed. It's demonstrated that the optimal deadline-based incentive contract depends on the confidence level of the party (either the project manager or the subcontractor) who adopts the critical value criterion. Meanwhile, the more conservative the subcontractor is, the higher the incentive coefficients will be. And the more conservative the project manager is, the lower the incentive coefficients will be. Finally, given some special confidence levels, it's interesting to find that the four models can be equivalent.
Year
DOI
Venue
2017
10.1007/s10845-014-0994-4
J. Intelligent Manufacturing
Keywords
Field
DocType
Uncertainty theory,Project management,Incentive contract,Asymmetric information,Decision criterion
Mathematical optimization,Multiple-criteria decision analysis,Information asymmetry,Incentive,Project manager,Principal–agent problem,Engineering,Unobservable,Uncertainty theory,Project management
Journal
Volume
Issue
ISSN
28
3
0956-5515
Citations 
PageRank 
References 
2
0.39
16
Authors
3
Name
Order
Citations
PageRank
Jiao Wang1178.27
Kai Yang21218.47
Ruiqing Zhao358846.97