Modeling the green building (GB) investment decisions of developers and end-users with transaction costs (TCs) considerations

The paper, through a “regenerative” lens, has focused upon a new conceptual game system involving transaction costs (TCs) for creating a more accessible green buildings (GB) market. Individual stakeholders steadfastly guard their own interests in any investment decision, which seldom considers any positive gains to society. Green buildings, branded as partial public goods, involve rational and irrational factors, incurring extra transaction costs (TCs) and affecting the willingness of the stakeholders to take part. This paper examines how to reduce the TCs incurred during the game played in the decision-making process with the ultimate aim of promoting GB. In the game model, the developers and end-users negotiate and bargain over the TCs caused by GB in comparison with its conventional counterpart. The findings are that 1) TCs are the overriding barriers impeding the development of the GB market. Reducing TCs will facilitate supply and demand in the GB market; 2) the equilibrium payoffs for the developer and the end-user are proportional to their bargaining powers (the higher the bargaining power is, the more benefit it will gain from the GB transaction); 3) strengthening the bargaining power of the developer can increase the expected utility of developing GB; and 4) more fake GB products or less credible developers will result in higher TCs for the end-users and therefore lower payoffs will be expected. The findings stress that the choice between developers & end-users over investing in GB is a complex game problem, where TCs could be conceptualized and showed their important role. By minimizing the TCs incurred in the complex decision of GB, it will not only benefit themselves but also bring net regenerative outcomes to society.