Game theory and construction - Revision history

Designing Buildings at 07:04, 20 April 2022

2022-04-20T07:04:57Z

← Older revision		Revision as of 07:04, 20 April 2022
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	By looking at the best possible outcomes and working backward from them using game theory, project managers may be able to identify and implement the optimum strategy.		By looking at the best possible outcomes and working backward from them using game theory, project managers may be able to identify and implement the optimum strategy.

−	= Related articles on Designing Buildings ~~Wiki~~ =	+	= Related articles on Designing Buildings =

	* Auction theory.		* Auction theory.
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	* Tender process.		* Tender process.
	* Value management.		* Value management.
−	* ~~Zone of possible agreement~~.	+	* Zero sum game.

	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]		[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]

Designing Buildings at 07:24, 5 November 2020

2020-11-05T07:24:28Z

← Older revision		Revision as of 07:24, 5 November 2020
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	* Zone of possible agreement.		* Zone of possible agreement.

−	[[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]

Editor at 16:51, 28 July 2020

2020-07-28T16:51:19Z

← Older revision		Revision as of 16:51, 28 July 2020
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	* Auction theory.		* Auction theory.
		+	* Bidding tactics.
	* Bid strategies.		* Bid strategies.
	* Chaos theory.		* Chaos theory.

Editor at 19:28, 20 February 2019

2019-02-20T19:28:14Z

← Older revision		Revision as of 19:28, 20 February 2019
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	By looking at the best possible outcomes and working backward from them using game theory, project managers may be able to identify and implement the optimum strategy.		By looking at the best possible outcomes and working backward from them using game theory, project managers may be able to identify and implement the optimum strategy.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Auction theory.		* Auction theory.
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	* Contingency theory.		* Contingency theory.
	* Fuzzy logic.		* Fuzzy logic.
		+	* Monte Carlo simulation.
	* Negotiation techniques.		* Negotiation techniques.
	* Plan, Do, Check, Act (PDCA).		* Plan, Do, Check, Act (PDCA).

Editor at 16:34, 27 June 2018

2018-06-27T16:34:49Z

← Older revision		Revision as of 16:34, 27 June 2018
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	* Strong competition within the construction market.		* Strong competition within the construction market.
	* Differential opportunity costs.		* Differential opportunity costs.
−	* Winning the bid and then increasing the price through variation orders, claims and so on.	+	* Winning the bid and then increasing the price through variation orders, claims, and so on.

	An effective project manager, managing progress and deciding on priorities, will negotiate with a range of different stakeholders and arrive at solutions that are advantageous for the project as a whole.		An effective project manager, managing progress and deciding on priorities, will negotiate with a range of different stakeholders and arrive at solutions that are advantageous for the project as a whole.
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	* Fuzzy logic.		* Fuzzy logic.
	* Negotiation techniques.		* Negotiation techniques.
		+	* Plan, Do, Check, Act (PDCA).
	* Project manager.		* Project manager.
	* Risk management.		* Risk management.

Editor at 16:44, 19 March 2018

2018-03-19T16:44:32Z

← Older revision		Revision as of 16:44, 19 March 2018
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	* Complexity theory.		* Complexity theory.
	* Conflict avoidance.		* Conflict avoidance.
		+	* Contingency theory.
	* Fuzzy logic.		* Fuzzy logic.
	* Negotiation techniques.		* Negotiation techniques.

Editor at 13:18, 10 January 2018

2018-01-10T13:18:35Z

← Older revision		Revision as of 13:18, 10 January 2018
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	* Chaos theory.		* Chaos theory.
	* Complexity theory.		* Complexity theory.
		+	* Conflict avoidance.
	* Fuzzy logic.		* Fuzzy logic.
	* Negotiation techniques.		* Negotiation techniques.

Editor at 15:24, 26 September 2017

2017-09-26T15:24:25Z

← Older revision		Revision as of 15:24, 26 September 2017
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	* Tender process.		* Tender process.
	* Value management.		* Value management.
		+	* Zone of possible agreement.

	[[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]		[[Category:Theory]] [[Category:Construction_management]] [[Category:Procurement]]

Designing Buildings at 09:09, 30 December 2016

2016-12-30T09:09:20Z

← Older revision		Revision as of 09:09, 30 December 2016
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	* Winning the bid and then increasing the price through variation orders, claims and so on.		* Winning the bid and then increasing the price through variation orders, claims and so on.

−	~~The~~ project manager ~~in construction must manage~~ progress and ~~decide~~ on priorities~~. This involves negotiating~~ with different stakeholders and ~~arriving~~ at solutions that are advantageous for the project. When entering negotiations, ~~keeping game theory in mind, a project manager~~ should consider ~~the following~~:	+	An effective project manager, managing progress and deciding on priorities, will negotiate with a range of different stakeholders and arrive at solutions that are advantageous for the project as a whole.
		+
		+	When entering negotiations, they should consider:

	* The issue that has to be solved.		* The issue that has to be solved.
	* The parties involved in the issue.		* The parties involved in the issue.
	* The parties who will have an impact on the success of the decision taken.		* The parties who will have an impact on the success of the decision taken.
		+	* Whether there are any time or cost issues.
		+	* Whether they should make decisions independently or wait for others to make their decisions.
		+	* Whether mutual gain is possible.
		+	* What their end goals are, and so on.

−	When approaching the parties, a project manager should think about whether they have any time or cost issues, whether they will be likely to make decisions independently or wait for others to make their decisions, whether mutual gain is possible, what their end goals are, and so on.	+	By looking at the best possible outcomes and working backward from them using game theory, project managers may be able to identify and implement the optimum strategy.
−		+
−	~~Therefore, by~~ looking at the best possible outcomes and working backward from them~~, and~~ using game theory, project managers ~~can choose~~ the optimum strategy.	+

	= Find out more =		= Find out more =

Designing Buildings at 09:04, 30 December 2016

2016-12-30T09:04:41Z

← Older revision		Revision as of 09:04, 30 December 2016
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−	[[File:Gametheory.png\|~~286px~~]]	+	[[File:Gametheory.png\|link=File:Gametheory.png]]

−	Game theory is a study of mathematical modelling ~~that is applied~~ across many fields where some degree of strategy is needed~~, but~~ can be used in construction as an efficient framework in decision-making ~~about problems~~ and ~~disputes~~.	+	Game theory is the study of mathematical modelling techniques, used across many fields where some degree of strategy is needed. It can be used in construction as an efficient framework for decision-making and dispute resolution.

−	While it was originally based around zero-sum games – one person’s gains result in other’s losses – game theory is more ~~often~~ used as a broad term for logical decision-making and can be used as a tool for project management.	+	While it was originally based around zero-sum games – one person’s gains result in other’s losses – game theory today is more commonly used as a broad term for logical decision-making and can be used as a tool for project management.

−	Game theory was developed ~~from mathematical models~~ in the 1950s by scientists such as John Nash and John van Neumann.	+	Game theory was first developed in the 1950s by scientists such as John Nash and John van Neumann.

−	The reason for game theory’s applicability across many different disciplines is that it is concerned with decision-making among groups of people where the outcome for each person ~~in a given situation~~ depends on the actions of everyone in the group. Using applied mathematics, predictions ~~as to~~ an individual’s ~~success in~~ decision-making ~~are made~~, depending on the choices of the others.	+	The reason for game theory’s applicability across many different disciplines is that it is concerned with decision-making among groups of people where the outcome for each person depends on the actions of everyone in the group. Using applied mathematics, predictions can be made regarding an individual’s decision-making strategy, depending on the choices and thinking of the others.

−	The ~~choices~~ of ~~others should always~~ be ~~taken into account when choosing a decision-making strategy, as well as the thinking of other parties~~.	+	The ‘Prisoner’s Dilemma’ is a classic example of game theory, revealing why two ‘rational’ individuals may not choose to cooperate despite both being aware that to do so appears to be in their best interest.

−	The ‘Prisoner’s Dilemma’ is a classic example of game theory, which aims to show why two ‘rational’ individuals may not choose to cooperate despite them both being aware that to do so appears to be in their best interest. The scenario used to illustrate the ‘dilemma’ is two prisoners ~~who~~ are held for a burglary. Each prisoner is offered the following deals:	+	Two prisoners are held for a burglary. Each prisoner is offered the following deals:

	* They will serve a full prison sentence if both confess.		* They will serve a full prison sentence if both confess.
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	* If neither prisoner confesses both will share a lesser sentence.		* If neither prisoner confesses both will share a lesser sentence.

−	It is in both prisoners’ best interest to share the lesser sentence and not testify against one another. However, ~~the dilemma is intensified since each~~ prisoner ~~cannot~~ be sure of the other ~~staying~~ silent. According to game theory, both prisoners will follow their self-interest and ~~each~~ confess.	+	It is in both prisoners’ best interest to share the lesser sentence and not testify against one another. However, neither prisoner can be sure that the other will stay silent. According to game theory therefore, both prisoners will follow their self-interest and confess.

−	~~This~~ has been used in the study of construction bidding practices. Bidding is undertaken between competing parties, with ~~the~~ conflict bringing into play many of the factors that influence the decision of the final bid.	+	Game theory has also been used in the study of the construction bidding practices. Bidding is undertaken between competing parties, with conflict bringing into play many of the factors that influence the decision of the final bid.

−	A contractor may raise or lower ~~its~~ price ~~at bid time~~ due to a lack of information. ~~‘Winner’s~~ curse’, usually associated with auctions, refers to ~~the~~ tendency for ~~a contractor~~ to ~~bid~~ a price which ~~hinders their~~ prospects of ~~making it~~ viable for them in terms of profitability~~. Due to the fact that the true cost of construction is not known until the project is completed, adverse selection is a serious concern~~. Winner’s curse can be attributed to ~~several factors, including~~:	+	A contractor may raise or lower their price due to a lack of information. The ‘winner’s curse’, usually associated with auctions, refers to a tendency for contractors to offer a price which reduces the prospects of the project being viable for them in terms of profitability. Winner’s curse can be attributed to :

−	* Inaccurate estimates of project ~~cost~~.	+	* Inaccurate estimates of project costs.
−	* ~~The construction market being entered by new~~ contractors.	+	* New contractors entering a market.
	* Minimising losses in case of recession of the industry or wider economy.		* Minimising losses in case of recession of the industry or wider economy.
	* Strong competition within the construction market.		* Strong competition within the construction market.
−	* Differential opportunity costs ~~which can affect contractors’ behaviour~~.	+	* Differential opportunity costs.
−	* ~~Intention of contractor to win~~ the bid and then ~~remedy~~ the ~~losses~~ through variation orders, claims and ~~other mechanisms~~.	+	* Winning the bid and then increasing the price through variation orders, claims and so on.

	The project manager in construction must manage progress and decide on priorities. This involves negotiating with different stakeholders and arriving at solutions that are advantageous for the project. When entering negotiations, keeping game theory in mind, a project manager should consider the following:		The project manager in construction must manage progress and decide on priorities. This involves negotiating with different stakeholders and arriving at solutions that are advantageous for the project. When entering negotiations, keeping game theory in mind, a project manager should consider the following: