Quantitative Risk Allocation in Construction Projects Using Cooperative-Bargaining Game Theory

This paper presents a cooperative-bargaining game model for quantitative risk allocation that extends the previous existing system dynamics (SD) based model. The proposed model accounts for both the client and the contractor costs to perform the quantitative risk allocation process. In this research, the behavior of contracting parties in the quantitative risk allocation process is modeled as the players’ behavior in a game. The cooperative game forms at a risk allocation percentage at which the summation of the client and the contractor costs are minimized. A bargaining process is then performed to share the benefit of a decrease in the contractor costs between the client and the contractor. To evaluate the performance of the proposed model, it has been employed in a pipeline project. The quantitative risk allocation is performed for the inflation as one of the most important identified risks. It is shown that using the proposed cooperative-bargaining game model, the percentage of risk allocated to the client is determined to be 100. Hence, the client and the contractor costs are decreased by 3.1 and 3.7 % in comparison to the previous SD-based risk allocation approach, respectively.