Modeling of Fragmentation in the Construction Industry

This study develops a self recruiting-subletting cost indifference point model to explain the fragmentation in the structure of the construction industry. Although a high proportion of small firms in the construction industry has be criticized as it prevents the exploitation of economies of scale, the self recruiting-subletting cost indifference point model theoretically proposes that subletting is usually profitable for construction firms; thus the size distribution of the construction industry should skewed towards small firms.