Evaluating fixed price incentive contracts

Ward, S.C. and Chapman, C.B. (1995) Evaluating fixed price incentive contracts. Omega, 23, (1), 49-62. (doi:10.1016/0305-0483(94)00047-E).


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This paper considers choosing between different forms of fixed price incentive contracts. The analysis assumes the underlying probability density function for project costs is triangular. The methods of evaluation considered are expected value, certainty equivalence and stochastic dominance.

The latter two methods take into account the typical risk aversion of contractors and clients. The analytical form of project cost and incentive contract adopted offer a robust analysis suitable for a wide variety of practical situations. However, the methods of evaluation described could be applied to other forms of contract and cost distribution.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/0305-0483(94)00047-E
ISSNs: 0305-0483 (print)
Related URLs:
Keywords: contracting, risk analysis, dominance, decision making
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions : University Structure - Pre August 2011 > School of Management
ePrint ID: 35678
Accepted Date and Publication Date:
Date Deposited: 26 Jun 2006
Last Modified: 31 Mar 2016 12:03
URI: http://eprints.soton.ac.uk/id/eprint/35678

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