Influence of consumer preference and government subsidy on prefabricated building developer’s decision-making: a three-stage game model
Abstract
Consumer preference and government subsidies are two of the key influencing factors in the decision-making of building developers, which plays a leading role in the development of prefabricated building market. However, the majority of the existing efforts only used empirical research methods to identify the barriers of prefabricated construction, and failed to quantitatively study the interaction mechanism, process, and trends among the influencing factors. To address this knowledge gap, this study aims to analyze and quantify the dynamic and interactive relationships among the three major stakeholders in the prefabricated building industry – the government, building developers, and consumers. A three-stage game model was developed, and an analysis of two numerical simulations was conducted. The results provided equilibrium solutions for the optimal selling price and optimal assembly rate for the building developers, as well as the optimal minimum assembly rate for government subsidy. This study provides a better understanding of the interactive behaviors among the major stakeholders, and offers meaningful insights for policy design and strategic planning for promoting the development of prefabricated buildings.
Keyword : prefabricated building, building developers, government policy and subsidy, assembly rate, consumer preference
How to Cite
Han, Y., Wang, L., & Kang, R. (2023). Influence of consumer preference and government subsidy on prefabricated building developer’s decision-making: a three-stage game model. Journal of Civil Engineering and Management, 29(1), 35–49. https://doi.org/10.3846/jcem.2023.18038
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Li, J., Liu, H., Zuo, J., Xia, R., & Zillante, G. (2018). Are construction enterprises ready for industrialized residential building policy? A case study in Shenzhen. Sustainable Cities and Society, 41, 899–906. https://doi.org/10.1016/j.scs.2018.06.033
Liu, G., Tao, Y., & Mao, C. (2018). Textual and quantitative research on Chinese prefabricated construction policy from the perspective of policy tools. Journal of Chongqing University (Social Science Edition), 5, 56–65 (in Chinese).
Ma, X., Ho, W., Ji, P., & Talluri, S. (2018). Coordinated pricing analysis with the carbon tax scheme in a supply chain. Decision Sciences, 49(5), 863–900. https://doi.org/10.1111/deci.12297
Mao, C., Liu, G., Shen, L. Y., Wang, X., & Wang, J. (2018). Structural equation modeling to analyze the critical driving factors and paths for off-site construction in China. KSCE Journal of Civil Engineering, 22, 2678–2690. https://doi.org/10.1007/s12205-017-1705-4
Mao, C., Shen, Q., Pan, W., & Ye, K. (2015). Major barriers to off-site construction: The developer’s perspective in China. Journal of Management in Engineering, 31(3), 04014043. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000246
Mao, C., Xie, F., Hou, L., Wu, P., Wang, J., Wang, X. (2016). Cost analysis for sustainable off-site construction based on a multiple-case study in China. Habitat International, 57, 215–222. https://doi.org/10.1016/j.habitatint.2016.08.002
Miao, Z., Mao, H., Fu, K., & Wang, Y. (2018). Remanufacturing with trade-ins under carbon regulations. Computers & Operations Research, 89, 253–268. https://doi.org/10.1016/j.cor.2016.03.014
Mitra, S., & Webster, C. (2008). Competition in remanufacturing and the effect of government subsidies. International Journal of Production Economics, 111(2), 287–298. https://doi.org/10.1016/j.ijpe.2007.02.042
Pan, W., Gibb, A. G., & Dainty, A. R. (2007). Perspectives of UK housebuilders on the use of offsite modern methods of construction. Construction Management and Economics, 25(2), 183–194. https://doi.org/10.1080/01446190600827058
Park, M., Ingawale-Verma, Y., Kim, W., & Ham, Y. (2011). Construction policymaking: with an example of Singaporean Government’s policy to diffuse prefabrication to private sector. KSCE Journal of Civil Engineering, 15(5), 771–779. https://doi.org/10.1007/s12205-011-1243-4
Phillips, D., Guaralda, M., & Sawang, S. (2016). Innovative housing adoption: Modular housing for the Australian growing family. Journal of Green Building, 11(2), 147–170. https://doi.org/10.3992/jgb.11.2.147.1
Pigou, A. C. (1920). The economics of welfare. Macmillan and Co.
Rahman, M. M. (2014). Barriers of implementing modern methods of construction. Journal of Management in Engineering, 30(1), 69–77. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000173
Raz, G., & Ovchinnikov, A. (2015). Coordinating pricing and supply of public interest goods using government rebates and subsidies. IEEE Transactions on Engineering Management, 62(1), 65–79. https://doi.org/10.1109/TEM.2014.2380999
Shanghai Municipal Housing Administration, Municipal Development and Reform Commission, Municipal Administration of Planning, Land and Resources, & Municipal Finance Bureau. (2014). Opinions on the implementation of the prefabricated building 2014901. http://www.shjx.org.cn/article-6597.aspx
Sheu, J. B., & Chen, Y. J. (2012). Impact of government financial intervention on competition among green supply chains. International Journal of Production Economics, 138(1), 201–213. https://doi.org/10.1016/j.ijpe.2012.03.024
Shi, Q., Zhu, J., Hertogh, M., & Sheng, Z. (2018). Incentive mechanism of prefabrication in mega projects with reputational concerns. Sustainability, 10(4), 1260. https://doi.org/10.3390/su10041260
Song, J., Fagerlund, W. R., Haas, C. T., Tatum, C. B., & Vanegas, J. A. (2005). Considering prework on industrial projects. Journal of Construction Engineering and Management, 131(6), 723–733. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:6(723)
Spencer, B. J., & Brander, J. A. (1983). International research and development rivalry and industrial strategy. Review of Economic Studies, 50(4), 707–722. https://doi.org/10.2307/2297771
Steinhardt, D. A., & Manley, K. (2016). Adoption of prefabricated housing-the role of country context. Sustainable Cities and Society, 22, 126–135. https://doi.org/10.1016/j.scs.2016.02.008
Tam, V. W. Y., Tam, C. M., Zeng, S. X., & Ng, W. C. Y. (2007). Towards adoption of prefabrication in construction. Building and Environment, 42(10), 3642–3654. https://doi.org/10.1016/j.buildenv.2006.10.003
Tang, X., Xue, X., Wang, Z., Wang, Y., & Luo, T. (2019). Analysis and countermeasures of prefabricated building policy in Guangzhou. In International Conference on Construction and Real Estate Management 2019 (pp. 859–867), Banff, Alberta, Canada. https://doi.org/10.1061/9780784482308.100
Technology and Industrialization Development Center Affiliated to Ministry of Housing and Urban-Rural Construction. (2020). Report of China prefabricated building development in 2019. http://www.cstcmoc.org.cn/plus/view.php?aid=5202
United States Environmental Protection Agency. (2020). Construction and demolition debris: Material-specific data. http://www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/construction-and-demolition-debris-material
Wu, G., Yang, R., Li, L., Bi, X., Liu, B., Li, S., & Zhou, S. (2019a). Factors influencing the application of prefabricated construction in China: From perspectives of technology promotion and cleaner production. Journal of Cleaner Production, 219, 753–762. https://doi.org/10.1016/j.jclepro.2019.02.110
Wu, H., Qian, Q. K., Straub, A., & Visscher, H. (2019b). Exploring transaction costs in the prefabricated housing supply chain in China. Journal of Cleaner Production, 226, 550–563. https://doi.org/10.1016/j.jclepro.2019.04.066
Wuni, I. Y., & Shen, G. Q. (2020). Barriers to the adoption of modular integrated construction: Systematic review and meta-analysis, integrated conceptual framework, and strategies. Journal of Cleaner Production, 249, 119347. https://doi.org/10.1016/j.jclepro.2019.119347
Yang, S. M., Qiu, J. F., & Wu, F. (2017). Suggestions on the status quo and development policy of assembly buildings in Chengdu. Sichuan Building Materials, 43(7), 48–57 (in Chinese).
Zakaria, S. A. S., Gajendran, T., Rose, T., & Brewer, G. (2018). Contextual, structural and behavioural factors influencing the adoption of industrialised building systems: A review. Architectural Engineering and Design Management, 14(1–2), 3–26. https://doi.org/10.1080/17452007.2017.1291410
Zhang, H., Li, L., Zhou, P., Hou, J., & Qiu, Y. (2014a). Subsidy modes, waste cooking oil and biofuel: Policy effectiveness and sustainable supply chains in China. Energy Policy, 65, 270–274. https://doi.org/10.1016/j.enpol.2013.10.009
Zhang, J., Long, Y., Lv, S., & Xiang, Y. (2016). BIM-enabled modular and industrialized construction in China. Procedia Engineering, 145, 1456–1461. https://doi.org/10.1016/j.proeng.2016.04.183
Zhang, J., Xie, H., & Li, H. (2017). Positioning and priorities of growth management in construction industrialization: Chinese firm-level empirical research. Sustainability, 9(7), 1105. https://doi.org/10.3390/su9071105
Zhang, X. (2019). Study on dynamic control model of assembly construction cost based on piecewise regression analysis. IOP Conference Series: Materials Science and Engineering, 612(3), 032121. https://doi.org/10.1088/1757-899X/612/3/032121
Zhang, X., Skitmore, M., & Peng, Y. (2014b). Exploring the challenges to industrialized residential building in China. Habitat International, 41, 176–184. https://doi.org/10.1016/j.habitatint.2013.08.005
Zhang, Z. (2013). The study on construction technology and economic benefits of PC wall in industrialized building. South China University of Technology, Guangzhou (in Chinese).
Eastman, C. M., & Sacks, R. (2008). Relative productivity in the AEC industries in the United States for on-site and off-site activities. Journal of Construction Engineering and Management, 134(7), 517–526. https://doi.org/10.1061/(ASCE)0733-9364(2008)134:7(517)
Gao, Y., & Tian, X. L. (2020). Prefabrication policies and the performance of construction industry in China. Journal of Cleaner Production, 253, 120042. https://doi.org/10.1016/j.jclepro.2020.120042
Gan, X.-L., Chang, R.-D., Langston, C., & Wen, T. (2019). Exploring the interactions among factors impeding the diffusion of prefabricated building technologies Fuzzy cognitive maps. Engineering, Construction and Architectural Management, 26(3), 535–553. https://doi.org/10.1108/ECAM-05-2018-0198
Gan, X., Chang, R., & Wen, T. (2018a). Overcoming barriers to off-site construction through engaging stakeholders: A two-mode social network analysis. Journal of Cleaner Production, 201, 735–747. https://doi.org/10.1016/j.jclepro.2018.07.299
Gan, X., Chang, R., Zuo, J., Wen, T., & Zillante, G. (2018b). Barriers to the transition towards off-site construction in China: An Interpretive structural modeling approach. Journal of Cleaner Production, 197, 8–18. https://doi.org/10.1016/j.jclepro.2018.06.184
Girma, S., Gorg, H., Strobl, E., & Walsh, F. (2008). Creating jobs through public subsidies: An empirical analysis. Labour Economics, 15(6), 1179–1199. https://doi.org/10.1016/j.labeco.2007.11.002
Guo, J., Ma, Y. L., & Hao, S. Y. (2015). Study on the incentive mechanism of housing industrialization in safe housing. Journal of Engineering Management, 29(5), 125–129.
Han, Y., Skibniewski, M. J., & Wang, L. (2017). A market equilibrium supply chain model for supporting self-manufacturing or outsourcing decisions in prefabricated construction. Sustainability, 9(11), 2069. https://doi.org/10.3390/su9112069
Han, Y., & Wang, L. (2018). Identifying barriers to off-site construction using grey DEMATEL approach: Case of China. Journal of Civil Engineering and Management, 24(5), 364–377. https://doi.org/10.3846/jcem.2018.5181
Hong, J., Li, C. Z., Shen, Q., Xue, F., Sun, B., & Zheng, W. (2017). An overview of the driving forces behind energy demand in China’s construction industry: Evidence from 1990 to 2012. Renewable and Sustainable Energy Reviews, 73, 85–94. https://doi.org/10.1016/j.rser.2017.01.021
Hwang, B. G., Shan, M., & Looi, K. Y. (2018). Key constraints and mitigation strategies for prefabricated prefinished volumetric construction. Journal of Cleaner Production, 183, 183–193. https://doi.org/10.1016/j.jclepro.2018.02.136
Jaillon, L., & Poon, C. S. (2010). Design issues of using prefabrication in Hong Kong building construction. Construction Management and Economics, 28(10), 1025–1042. https://doi.org/10.1080/01446193.2010.498481
Jiang, R., Mao, C., Hou, L., Wu, C., & Tan, J. (2017). A SWOT analysis for promoting off-site construction under the backdrop of China’s new urbanisation. Journal of Cleaner Production, 173, 225–234. https://doi.org/10.1016/j.jclepro.2017.06.147
Kamali, M., & Hewage, K. (2016). Life cycle performance of modular buildings: A critical review. Renewable and Sustainable Energy Reviews, 62, 1171–1183. https://doi.org/10.1016/j.rser.2016.05.031
Kamali, M., & Hewage, K. (2017). Development of performance criteria for sustainability evaluation of modular versus conventional construction methods. Journal of Cleaner Production, 142, 3592–3606. https://doi.org/10.1016/j.jclepro.2016.10.108
Leahy, D., & Neary, J. P. (1997). Public policy towards R&D in oligopolistic industries. American Economic Review, 87(4), 642–662.
Li, J., Liu, H., Zuo, J., Xia, R., & Zillante, G. (2018). Are construction enterprises ready for industrialized residential building policy? A case study in Shenzhen. Sustainable Cities and Society, 41, 899–906. https://doi.org/10.1016/j.scs.2018.06.033
Liu, G., Tao, Y., & Mao, C. (2018). Textual and quantitative research on Chinese prefabricated construction policy from the perspective of policy tools. Journal of Chongqing University (Social Science Edition), 5, 56–65 (in Chinese).
Ma, X., Ho, W., Ji, P., & Talluri, S. (2018). Coordinated pricing analysis with the carbon tax scheme in a supply chain. Decision Sciences, 49(5), 863–900. https://doi.org/10.1111/deci.12297
Mao, C., Liu, G., Shen, L. Y., Wang, X., & Wang, J. (2018). Structural equation modeling to analyze the critical driving factors and paths for off-site construction in China. KSCE Journal of Civil Engineering, 22, 2678–2690. https://doi.org/10.1007/s12205-017-1705-4
Mao, C., Shen, Q., Pan, W., & Ye, K. (2015). Major barriers to off-site construction: The developer’s perspective in China. Journal of Management in Engineering, 31(3), 04014043. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000246
Mao, C., Xie, F., Hou, L., Wu, P., Wang, J., Wang, X. (2016). Cost analysis for sustainable off-site construction based on a multiple-case study in China. Habitat International, 57, 215–222. https://doi.org/10.1016/j.habitatint.2016.08.002
Miao, Z., Mao, H., Fu, K., & Wang, Y. (2018). Remanufacturing with trade-ins under carbon regulations. Computers & Operations Research, 89, 253–268. https://doi.org/10.1016/j.cor.2016.03.014
Mitra, S., & Webster, C. (2008). Competition in remanufacturing and the effect of government subsidies. International Journal of Production Economics, 111(2), 287–298. https://doi.org/10.1016/j.ijpe.2007.02.042
Pan, W., Gibb, A. G., & Dainty, A. R. (2007). Perspectives of UK housebuilders on the use of offsite modern methods of construction. Construction Management and Economics, 25(2), 183–194. https://doi.org/10.1080/01446190600827058
Park, M., Ingawale-Verma, Y., Kim, W., & Ham, Y. (2011). Construction policymaking: with an example of Singaporean Government’s policy to diffuse prefabrication to private sector. KSCE Journal of Civil Engineering, 15(5), 771–779. https://doi.org/10.1007/s12205-011-1243-4
Phillips, D., Guaralda, M., & Sawang, S. (2016). Innovative housing adoption: Modular housing for the Australian growing family. Journal of Green Building, 11(2), 147–170. https://doi.org/10.3992/jgb.11.2.147.1
Pigou, A. C. (1920). The economics of welfare. Macmillan and Co.
Rahman, M. M. (2014). Barriers of implementing modern methods of construction. Journal of Management in Engineering, 30(1), 69–77. https://doi.org/10.1061/(ASCE)ME.1943-5479.0000173
Raz, G., & Ovchinnikov, A. (2015). Coordinating pricing and supply of public interest goods using government rebates and subsidies. IEEE Transactions on Engineering Management, 62(1), 65–79. https://doi.org/10.1109/TEM.2014.2380999
Shanghai Municipal Housing Administration, Municipal Development and Reform Commission, Municipal Administration of Planning, Land and Resources, & Municipal Finance Bureau. (2014). Opinions on the implementation of the prefabricated building 2014901. http://www.shjx.org.cn/article-6597.aspx
Sheu, J. B., & Chen, Y. J. (2012). Impact of government financial intervention on competition among green supply chains. International Journal of Production Economics, 138(1), 201–213. https://doi.org/10.1016/j.ijpe.2012.03.024
Shi, Q., Zhu, J., Hertogh, M., & Sheng, Z. (2018). Incentive mechanism of prefabrication in mega projects with reputational concerns. Sustainability, 10(4), 1260. https://doi.org/10.3390/su10041260
Song, J., Fagerlund, W. R., Haas, C. T., Tatum, C. B., & Vanegas, J. A. (2005). Considering prework on industrial projects. Journal of Construction Engineering and Management, 131(6), 723–733. https://doi.org/10.1061/(ASCE)0733-9364(2005)131:6(723)
Spencer, B. J., & Brander, J. A. (1983). International research and development rivalry and industrial strategy. Review of Economic Studies, 50(4), 707–722. https://doi.org/10.2307/2297771
Steinhardt, D. A., & Manley, K. (2016). Adoption of prefabricated housing-the role of country context. Sustainable Cities and Society, 22, 126–135. https://doi.org/10.1016/j.scs.2016.02.008
Tam, V. W. Y., Tam, C. M., Zeng, S. X., & Ng, W. C. Y. (2007). Towards adoption of prefabrication in construction. Building and Environment, 42(10), 3642–3654. https://doi.org/10.1016/j.buildenv.2006.10.003
Tang, X., Xue, X., Wang, Z., Wang, Y., & Luo, T. (2019). Analysis and countermeasures of prefabricated building policy in Guangzhou. In International Conference on Construction and Real Estate Management 2019 (pp. 859–867), Banff, Alberta, Canada. https://doi.org/10.1061/9780784482308.100
Technology and Industrialization Development Center Affiliated to Ministry of Housing and Urban-Rural Construction. (2020). Report of China prefabricated building development in 2019. http://www.cstcmoc.org.cn/plus/view.php?aid=5202
United States Environmental Protection Agency. (2020). Construction and demolition debris: Material-specific data. http://www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/construction-and-demolition-debris-material
Wu, G., Yang, R., Li, L., Bi, X., Liu, B., Li, S., & Zhou, S. (2019a). Factors influencing the application of prefabricated construction in China: From perspectives of technology promotion and cleaner production. Journal of Cleaner Production, 219, 753–762. https://doi.org/10.1016/j.jclepro.2019.02.110
Wu, H., Qian, Q. K., Straub, A., & Visscher, H. (2019b). Exploring transaction costs in the prefabricated housing supply chain in China. Journal of Cleaner Production, 226, 550–563. https://doi.org/10.1016/j.jclepro.2019.04.066
Wuni, I. Y., & Shen, G. Q. (2020). Barriers to the adoption of modular integrated construction: Systematic review and meta-analysis, integrated conceptual framework, and strategies. Journal of Cleaner Production, 249, 119347. https://doi.org/10.1016/j.jclepro.2019.119347
Yang, S. M., Qiu, J. F., & Wu, F. (2017). Suggestions on the status quo and development policy of assembly buildings in Chengdu. Sichuan Building Materials, 43(7), 48–57 (in Chinese).
Zakaria, S. A. S., Gajendran, T., Rose, T., & Brewer, G. (2018). Contextual, structural and behavioural factors influencing the adoption of industrialised building systems: A review. Architectural Engineering and Design Management, 14(1–2), 3–26. https://doi.org/10.1080/17452007.2017.1291410
Zhang, H., Li, L., Zhou, P., Hou, J., & Qiu, Y. (2014a). Subsidy modes, waste cooking oil and biofuel: Policy effectiveness and sustainable supply chains in China. Energy Policy, 65, 270–274. https://doi.org/10.1016/j.enpol.2013.10.009
Zhang, J., Long, Y., Lv, S., & Xiang, Y. (2016). BIM-enabled modular and industrialized construction in China. Procedia Engineering, 145, 1456–1461. https://doi.org/10.1016/j.proeng.2016.04.183
Zhang, J., Xie, H., & Li, H. (2017). Positioning and priorities of growth management in construction industrialization: Chinese firm-level empirical research. Sustainability, 9(7), 1105. https://doi.org/10.3390/su9071105
Zhang, X. (2019). Study on dynamic control model of assembly construction cost based on piecewise regression analysis. IOP Conference Series: Materials Science and Engineering, 612(3), 032121. https://doi.org/10.1088/1757-899X/612/3/032121
Zhang, X., Skitmore, M., & Peng, Y. (2014b). Exploring the challenges to industrialized residential building in China. Habitat International, 41, 176–184. https://doi.org/10.1016/j.habitatint.2013.08.005
Zhang, Z. (2013). The study on construction technology and economic benefits of PC wall in industrialized building. South China University of Technology, Guangzhou (in Chinese).