Contractor's risk attitudes in the selection of international construction projects

Seung Heon Han, James E. Diekmann, Jong H. Ock

Research output: Contribution to journalArticle

75 Citations (Scopus)

Abstract

International construction involves all of the uncertainties common to domestic construction projects as well as risks specific to international transactions. Consequently, despite the worldwide trend toward globalization, a very small portion of contractors actively seek international contracts due to concerns of probable failures. This paper describes findings from experiments done to investigate the risk attitude and bid decision behavior in the selection of international projects. The participants demonstrated either weak risk seeking in profit situations or strong risk seeking toward loss situations when choosing between conflicting options of risky opportunities and sure payoffs. On the other hand, another experimental test attempting to investigate bid behavior when making a realistic bid or no-bid decision in a complicated international construction project reveals the prevailing risk aversion. Further, this paper finds the experimental supports for some of the errors and biases due to risk attitude that commonly exist in bid decisions in this area. Finally, we present lessons learned and guidelines to make a qualified bid decision through feedback with the participants.

Original languageEnglish
Pages (from-to)283-292
Number of pages10
JournalJournal of Construction Engineering and Management
Volume131
Issue number3
DOIs
Publication statusPublished - 2005 Mar 1

All Science Journal Classification (ASJC) codes

  • Civil and Structural Engineering
  • Building and Construction
  • Industrial relations
  • Strategy and Management

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