An empirical investigation of opportunistic behaviour in project networks and its impact on market efficiency

Abstract

Subcontractor selection strategies employed by contractors can significantly impact the success of individual organizations and the overall efficiency of the market. Long-term partnerships are promoted by experts from both academia and industry as a means of achieving improved project network productivity; however, opportunistic bidding behaviour that may accompany its implementation might negate the benefits of close collaboration. We conducted a bidding experiment to empirically investigate whether opportunistic behaviour would emerge in a simulated subcontracting process. We conducted 18 experiments involving 6947 competitive bidding transactions between contractors and a pool of subcontractors. The empirical data were collected through an Internet-based interactive bidding simulation developed by the investigators. The findings contribute an empirical demonstration of how opportunistic behaviour occurs in the bidding process and how it can lead to different partner selection strategies by contractors and different market outcomes in terms of efficiency.