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Evaluating fixed price incentive contracts

Record type: Article

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.

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Citation

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

More information

Published date: 1995
Keywords: contracting, risk analysis, dominance, decision making
Organisations: Management

Identifiers

Local EPrints ID: 35678
URI: http://eprints.soton.ac.uk/id/eprint/35678
ISSN: 0305-0483
PURE UUID: ea6f1a9d-061e-43a8-b522-9eb2128fc66b

Catalogue record

Date deposited: 26 Jun 2006
Last modified: 17 Jul 2017 15:47

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