Optimization of project payment schedules with Nash equilibrium model and genetic algorithm

To minimize the deviations of the net present values of project payment for both the owner and the client and optimize project payment schedules, a Nash equilibrium model based on game theory was set up and a genetic algorithm was developed to work out the Nash equilibrium solution with a two-stage backward inductive approach that requires the client responds to the owner’s payment schedule with an activity schedule so as to maximize the client’s net present value of cash flows. A case study demonstrated that a payment schedule at the Nash equilibrium position enables both the owner and the client to gain their desirable interests, thus is a win-win solution for both parties. Despite the computation time of the proposed algrithm in need of improving, combining Nash equilibrium and genetic algorithm into a complete-information dynamic-game model is a promising method for project management optimization.