Applying the noncooperative game model for compensation concept in contractor selection process for large-scale projects

Nowadays, the scale of construction projects has been larger and more complex, the tender preparation is often costly to the bidder thus. It is becoming one of the primary barriers for attracting bidder’s involvement, as well as contractor's encouraging high effort. Bid compensation concept is proposed as a reward to foster the bidder participating in a higher endeavor. Game theory is ideal for modeling the dynamics and deriving high-effort strategies for bid compensation. The experiment results have demonstrated the owner can gain benefit by using rational compensation. The sensitivity analysis also shows the interest correlation between the owner and bidders. By choosing a proper strategy based on Nash Equilibrium solutions, both the owner and bidders can reach to win-win situation.