A Tentative Exploration of Incentives to Introduce Long Term Relationship between Construction General Contractor and Subcontractor from a Game-Chain Perspective

One of urgent issues for sustainable development of the Chinese construction industry is argued to be developing capable specialty contractors in the downstream of supply chain. One valuable approach inspired from Japanese construction is argued to be building long-term relationship between General Contractor (GC) and a group of allied subcontractors (SCs). Then there comes a crucial issue as how to initiate and motivate the involved players to establish and maintain this cooperative business relationship, particularly under today’s extremely competitive and uncertain business environment. This study aims to explore the potential incentives of long term relationship. A tentative game-chain model was conducted on the psychological competition scenarios between GC and SC in the activity of resource allocating. In this model, maintaining a long term working relationship is interpreted as a chain of games, in which the former game will exert influence on the latter through the actions each player takes. As a result, the systematic equilibrium must be approached based on a holistic and dynamic thinking. The analytic results show that under an uncertain and dynamic situation in resource allocating, one-off game (as short-term work relationship) between GC and SC leads to the worst equilibrium, interpreted as cheating behaviors by both players. However, with the game repeating more times (forming a game-chain), the systematic equilibrium moves to honest behaviors by both players, with an increase in both utilities. It indicates that long-term relationship could provide with economic incentive for both players in their economic activities. In future study, this approach needs to be evaluated more comprehensively, particularly on its potential demerits. For example, if SCs are too much “locked in” vertical relationship with GC, it might easily lead to SCs’ inability to diversity and over-reliance. It again reveals the significance of more careful considerations on implementation practically