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Fairness in interorganizational project relations: norms and strategies

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Author Info
Anna Kadefors
Abstract

There is a strong preference for fairness in human interaction, so that people who experience unfairness tend to react with anger, resentment and loss of motivation. Concerns to appear fair influence the behaviour of both individuals and firms. Perceptions of fairness are susceptible to framing and may be influenced by various norms for outcome distribution as well as by decision processes and interpersonal relations. This paper deals with causes and effects of fairness perceptions in construction project relations, mainly fixed price contracts procured by competitive tendering. In such projects, uncertainty results in continuous post contract award problem-solving and negotiations, and fairness concerns may have incremental but significant influence on the terms of exchange. Case studies of client--contractor interaction in two projects are used to discuss of how fairness norms relate to strategies and industry culture. It is concluded that that an intuitive cost-based norm of fair pricing shapes interaction in construction projects, but that consequences vary between projects. The norm may favour contractors, but is also related to poor risk management and client distrust. To improve performance, clients need to design procurement practices and communication so that perceptions of contractor losses are counteracted.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Construction Management & Economics.

Volume (Year): 23 (2005)
Issue (Month): 8 (October)
Pages: 871-878
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Handle: RePEc:taf:conmgt:v:23:y:2005:i:8:p:871-878

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Related research
Keywords: Construction contracts; conflict; procurement; fairness; winner's curse;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Simon Gaechter, 2003. "Altruistic Punishment in Humans," Microeconomics 0305006, EconWPA. [Downloadable!]
  2. I. D. Cox, J. P. Morris, J. H. Rogerson, G. E. Jared, 1999. "A quantitative study of post contract award design changes in construction," Construction Management & Economics, Taylor and Francis Journals, vol. 17(4), pages 427-439, July. [Downloadable!] (restricted)
  3. Diekmann, Kristina A. & Tenbrunsel, Ann E. & Shah, Pri Pradhan & Schroth, Holly A. & Bazerman, Max H., 1996. "The Descriptive and Prescriptive Use of Previous Purchase Price in Negotiations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 66(2), pages 179-191, May. [Downloadable!] (restricted)
  4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September. [Downloadable!] (restricted)
  6. Pillutla, Madan M. & Chen, Xiao-Ping, 1999. "Social Norms and Cooperation in Social Dilemmas: The Effects of Context and Feedback, , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 78(2), pages 81-103, May. [Downloadable!] (restricted)
  7. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
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