Construction project risk management based on the view of asymmetric information

Construction projects are facing a greater number of uncertainties and more severe risks, which could cause much bigger losses than in the past. From the perspective of information economics, asymmetric information gives rise to opportunistic behavior, which is the primary cause of loss of faith and increased risk in the construction market. Asymmetric information theory is helpful for solving problems arising in construction projects and for preventing construction project risk. The main objective in this paper is to explore risk prevention mechanisms and measures in construction projects on the basis of asymmetric information theory. The research processes are (1) exploring the relationship between asymmetric information and construction project risk and exploring the mechanisms of construction project risk formation on the basis of asymmetric information; (2) analyzing the issue of asymmetric information in construction projects and creating an information model of construction project management; (3) proposing measures for resolving information asymmetries of construction projects. The contributions to the literature are (1) an application of asymmetric information theory to construction project management, confirming that asymmetric information theory is helpful for resolving problems and preventing construction project risk; (2) showing that incomplete information, especially asymmetric information, is the essential cause of construction project risk.