Analysis of moral risk in the construction project based on information asymmetry

Weihua LV

Abstract

During the process of project construction, owners and contractors have a principal-agent relationship. The asymmetric information between owners and contractors causes moral risk. This moral risk should be prevented or controlled. In this paper, the principal-agent theory in information economics is applied to construct the model for the moral risk of the contractors. The quantitative analysis revealed how the interests can be maximized and how the management level of the project is increased by establishing a constraint mechanism. Subsequently, specific suggestions to constrain the immoral behaviors of the contractors are proposed.