Construction price formation: full‐cost pricing or neoclassical microeconomic theory?

Skitmore, Martin; Runeson, Goran; Chang, Xinling

doi:10.1080/01446190500434849

Cited by 32 publications

(49 citation statements)

References 23 publications

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“…These objectives include generating revenue, matching demand with supply and creating patronage for their services. Although, the neoclassical microeconomic theory, which focuses on the forces of demand and supply in determining price has been applied to pricing construction (Skitmore, Runeson, & Xinling, 2006), it appears to be of little value to the pricing of architectural services. This is because the force of demand is not often considered in pricing services in the architectural industry, although the objectives of generating revenue and creating patronage are still core.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This is because the force of demand is not often considered in pricing services in the architectural industry, although the objectives of generating revenue and creating patronage are still core. Skitmore, Runeson and Xinling (2006) however suggested that the practice of setting price in the construction industry is often a reflection of perceptions, thoughts, aspirations and preconceptions of the service provider. This is probably the reason the practice of pricing in the industry is often referred to as estimating (Balaji, 2002).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Pricing similar to, above, or below competitors, as well as pricing according to dominant price in the market were the approaches that constituted the competition-based pricing. The third category to which value pricing belongs was demand-based pricing, which according to Skitmore, Runeson and Xinling (2006) is aimed at maximizing profit. The assertion of Skitmore, Runeson and Xinling (2006) that costs and market conditions determine construction prices however suggest that the approaches used by architectural firms may differ.…”

Section: Case Studies In Business and Managementmentioning

confidence: 99%

“…The third category to which value pricing belongs was demand-based pricing, which according to Skitmore, Runeson and Xinling (2006) is aimed at maximizing profit. The assertion of Skitmore, Runeson and Xinling (2006) that costs and market conditions determine construction prices however suggest that the approaches used by architectural firms may differ. This is partly because architectural professional bodies often specify standards for pricing, which often holds irrespective of market conditions.…”

Section: Case Studies In Business and Managementmentioning

confidence: 99%

“…With the competitive pricing approach (also referred to as going rate by Mochtar and Arditi, 2000, and market-based pricing by Skitmore, Runeson. and Xinling, 2006), the architect charges the client a price that is similar to the average market price.…”

Section: Case Studies In Business and Managementmentioning

confidence: 99%

See 4 more Smart Citations

Approaches to Pricing Design Services: Evidence from Architectural Firms in Nigeria

Oluwatayo

Alagbe

Uwakonye

2014

CSBM

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The approaches adopted by firms in pricing design services have hitherto been a matter of speculation. Professional bodies often specify percentage and time charges, but there are indications that these firms use other approaches. The approaches adopted by architectural firms in pricing design services were therefore the object of this study. A sample of architectural firms from Nigeria, were asked to rate the prevalence of use, perceived benefits, and difficulties of the pricing approaches. The data were analyzed using mean ranking to obtain the level of use; and regression analysis to investigate the perceptions, which influence the use of the pricing approaches. The findings reveal that percentage fees were the most popular approaches adopted by most of the firms in the study in pricing design services. The perceptions, which influence the use of the different approaches, were also presented. Samples were taken from only architectural firms in Lagos and Abuja, Nigeria, where there is a concentration of registered architectural firms. The results may therefore not be generalized to other service firms. In addition only design services were considered. The results suggest the reasons approaches may be used for pricing design services and may serve as a guide to upcoming firms. Implications for further research were also drawn. The value of this study lies in the fact that it represents one of the first attempts at examining the approaches used by architects in pricing design services.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%