上海交通大学：公共管理类《专业英语》课程教学资源（阅读材料）A Game Theory Based Analysis of Decision Making for Green Retrofit under Different Occupancy Types

Journal of Cleaner Production 137(2016)1300-1312 Contents lists available at ScienceDirect Cleaner Production Journal of Cleaner Production ELSEVIER journal homepage:www.elsevier.com/locate/jclepro A game theory based analysis of decision making for green retrofit CrossMark under different occupancy types Xin Liang Yi Peng,Geoffrey Qiping Shen . School of International and Public Affairs,Shanghai Jiao Tong University.Shanghai.China bDepartment of Building and Real Estate.Hong Kong Polytechnic University.Hong Kong China School of Public Administration,Zhejiang University of Finance Economics,Hangzhou,China ARTICLE INFO ABSTRACT Article history: Buildings are responsible for almost half of all the energy consumption and greenhouse gas(GHG) Received 13 October 2014 emissions in the world.This situation highlights the importance of the green retrofit for existing Received in revised form buildings in reducing the energy consumption and GHG emissions,as emphasized by the academia and 5 April 2016 Accepted 28 July 2016 improved by the government.Although relevant stakeholders are interested in implementing green Available online 3 August 2016 retrofit projects,this approach has not been widely pursued by the industry.the reasons of which remain unclear.Therefore,this study aims to reveal the underlying logic by analyzing the behaviors of the Keywords: building owners and occupiers,who are the direct decision makers in initiating green retrofit at the Green retrofit initial intention phase.Three occupancy scenarios,namely,owner-occupied(baseline scenario),single- Decision making occupied,and multi-occupied buildings,are used for the game analysis.The Nash Equilibrium of the Game theory game is used to analyze the probable decisions of the owners and occupiers under the last two occu- Owner pancy scenarios.Results demonstrate that both owners and occupiers are reluctant to retrofit under both Occupier scenarios.Nevertheless,the reasons vary under the two scenarios despite the same results obtained.This study clarifies the reasons for the reluctance of the direct decision makers to participate in green retrofit projects.The main reasons include the split incentives between the owners and occupiers,the complex coordination,and the uncertainty of green retrofit.The identified reasons are also beneficial to the policy makers,particularly in their effort to promote green retrofit by considering the requirements of owners and occupiers under the different occupancy types. 2016 Elsevier Ltd.All rights reserved. 1.Introduction and economy (Menassa and Baer.2014).In the life cycle of a building,more than 80%of the energy consumption occurs during Buildings are responsible for the majority of the energy con- the actual occupancy operation stage rather than during the con- sumption and greenhouse gas(GHG)emissions around the world. struction stage (UNEP,2007). In the United States(US).buildings consume approximately 50%of Owing to its essential influence on energy consumption and the total energy(ElA,2010),while in Europe,the ratio is approxi- GHG emission,the green retrofit for existing buildings should be mately 40%(Kashif et al.,2011).In the last few decades,the building given due attention in relation to sustainable development."Green energy consumption has continuously increased,particularly in retrofit"can be defined as the incremental improvement of the developing countries.In China,the building energy consumption fabric and systems of a building with the primary intention of increased by more than 10%annually(Xu et al.,2011).Buildings are improving energy efficiency and reducing carbon emissions.It can also considered responsible for a quarter of the total global carbon likewise refer to other terms in literature,such as refurbishment. dioxide (CO2)emissions (Hong et al.,2015).which consequently rehabilitation,modernization,renovation,improvements,adapta- increase the adverse impact on the global environment,healthcare, tion,additions,repairs and renewal on existing buildings(Ali and Rahmat,2009).However,routine maintenance and cleaning work are excluded (Quah,1988). Green retrofit for existing buildings is emphasized by govern- Corresponding author. E-mail addresses:liangxinpku@gmail.com (X.Liang).pengyihz@gmail.com ments all over the world.The US government passed the Energy (Y.Peng).geoffrey.shen@polyu.edu.hk(G.QShen) Policy Act (EPA)of 2005 and the Executive Order 13423,which http://dx.doi.org/10.1016/j.jclepro.2016.07.200 0959-6526/0 2016 Elsevier Ltd.All rights reserved

A game theory based analysis of decision making for green retrofit under different occupancy types Xin Liang a, b , Yi Peng c , Geoffrey Qiping Shen b, * a School of International and Public Affairs, Shanghai Jiao Tong University, Shanghai, China b Department of Building and Real Estate, Hong Kong Polytechnic University, Hong Kong, China c School of Public Administration, Zhejiang University of Finance & Economics, Hangzhou, China article info Article history: Received 13 October 2014 Received in revised form 5 April 2016 Accepted 28 July 2016 Available online 3 August 2016 Keywords: Green retrofit Decision making Game theory Owner Occupier abstract Buildings are responsible for almost half of all the energy consumption and greenhouse gas (GHG) emissions in the world. This situation highlights the importance of the green retrofit for existing buildings in reducing the energy consumption and GHG emissions, as emphasized by the academia and improved by the government. Although relevant stakeholders are interested in implementing green retrofit projects, this approach has not been widely pursued by the industry, the reasons of which remain unclear. Therefore, this study aims to reveal the underlying logic by analyzing the behaviors of the building owners and occupiers, who are the direct decision makers in initiating green retrofit at the initial intention phase. Three occupancy scenarios, namely, owner-occupied (baseline scenario), single￾occupied, and multi-occupied buildings, are used for the game analysis. The Nash Equilibrium of the game is used to analyze the probable decisions of the owners and occupiers under the last two occu￾pancy scenarios. Results demonstrate that both owners and occupiers are reluctant to retrofit under both scenarios. Nevertheless, the reasons vary under the two scenarios despite the same results obtained. This study clarifies the reasons for the reluctance of the direct decision makers to participate in green retrofit projects. The main reasons include the split incentives between the owners and occupiers, the complex coordination, and the uncertainty of green retrofit. The identified reasons are also beneficial to the policy makers, particularly in their effort to promote green retrofit by considering the requirements of owners and occupiers under the different occupancy types. © 2016 Elsevier Ltd. All rights reserved. 1. Introduction Buildings are responsible for the majority of the energy con￾sumption and greenhouse gas (GHG) emissions around the world. In the United States (US), buildings consume approximately 50% of the total energy (EIA, 2010), while in Europe, the ratio is approxi￾mately 40% (Kashif et al., 2011). In the last few decades, the building energy consumption has continuously increased, particularly in developing countries. In China, the building energy consumption increased by more than 10% annually (Xu et al., 2011). Buildings are also considered responsible for a quarter of the total global carbon dioxide (CO2) emissions (Hong et al., 2015), which consequently increase the adverse impact on the global environment, healthcare, and economy (Menassa and Baer, 2014). In the life cycle of a building, more than 80% of the energy consumption occurs during the actual occupancy operation stage rather than during the con￾struction stage (UNEP, 2007). Owing to its essential influence on energy consumption and GHG emission, the green retrofit for existing buildings should be given due attention in relation to sustainable development. “Green retrofit” can be defined as the incremental improvement of the fabric and systems of a building with the primary intention of improving energy efficiency and reducing carbon emissions. It can likewise refer to other terms in literature, such as refurbishment, rehabilitation, modernization, renovation, improvements, adapta￾tion, additions, repairs and renewal on existing buildings (Ali and Rahmat, 2009). However, routine maintenance and cleaning work are excluded (Quah, 1988). Green retrofit for existing buildings is emphasized by govern￾ments all over the world. The US government passed the Energy Policy Act (EPA) of 2005 and the Executive Order 13423, which * Corresponding author. E-mail addresses: liangxinpku@gmail.com (X. Liang), pengyihz@gmail.com (Y. Peng), geoffrey.shen@polyu.edu.hk (G.Q. Shen). Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro http://dx.doi.org/10.1016/j.jclepro.2016.07.200 0959-6526/© 2016 Elsevier Ltd. All rights reserved. Journal of Cleaner Production 137 (2016) 1300e1312

X.Liang et aL Journal of Cleaner Production 137 (2016)1300-1312 1301 require retrofitting 15%of the total number of the existing buildings a potential and ongoing green retrofit project (Gucyeter and to improve energy efficiency by 2015 compared with the 2003 Gunaydin,2012).The main stakeholders identified by the litera- baseline (EPA,2005).Approximately 30 billion US dollars are ear- ture include the client/owner,occupier/tenant,facilities manager, marked to conduct green retrofit projects for the existing buildings consultant/designer,contractor,subcontractor,supplier,govern- and facilities.In 2010,the UK government launched the Carbon ment,financial institutions,energy service companies,environ- Reduction Commitment(CRC)Energy Efficiency Scheme to save 1.2 mental organization,professional association,media,public,labor million tons of CO,emissions annually by 2020.This scheme mo- union,and researcher/educator (Gultekin et al.,2013:Juan et al. tivates the consumers to consider energy efficiency options and to 2009:Kaklauskas et al.,2004.2008:Miller and Buys,2008;Yang invest in building retrofit projects.Similarly,the Chinese govern- and Zou,2014).which are shown in Fig.1.Previous studies asser- ment has introduced various policies.Chinese 12th Five-Year Plan ted that the process of green retrofit projects can normally be stipulated that 400 million m2 residential buildings and 60 million divided into five phases,namely.the 1)initial intention or setup,2) m public buildings are planned to be retrofitted as pilot projects pre-retrofit survey and energy performance assessment,3)design between 2011 and 2015 to improve building energy efficiency. 4)site implementation,and 5)validation and verification(Lapinski By contrast,green retrofit projects remain inadequately pursued et al.,2006;Ma et al.,2012).Various stakeholders are involved in in the industries.After the 2008 global economic recession,this green retrofit projects in the different phase (see Fig.1).For situation was further exacerbated by the challenge of ensuring the example,the energy consultants are normally involved in the pre- financial support for retrofit activities (Menassa,2011).Some pilot retrofit survey and energy performance assessment phase,whereas studies have revealed that the industries are unenthusiastic about the designers and contractors participate in the project at the green retrofit primarily because of the following aspects:the highly design and implementation phases. complex design analysis and solution (Davies and Osmani,2011: The owners and occupiers play important roles in making green Kasivisvanathan et al.,2012:Lapinski et al.,2006).intense inter- retrofit decisions,particularly at the very early stage,namely,initial disciplinary collaboration (Korkmaz et al.,2010:Lapinski et al. intention or setup phase (Liang et al..2015).In this phase,normally 2006),long payback periods (Kasivisvanathan et al.,2012: only the owners and occupiers are involved,who propose pre- Menassa,2011).financial problem (e.g.,limited access to capital, liminary retrofit plans and exchange opinions regarding retrofit. high cost,etc.)(Davies and Osmani,2011:Kasivisvanathan et al.. These stakeholders can decide whether to launch a retrofit project 2012:Xu et al,2011),lack of retrofit experience (Ali et al,2008: and to continue to the next steps of energy audit,design,and Kasivisvanathan et al.,2012:Korkmaz et al.,2010),and lack of implementation.The important role of owners in green retrofit can understanding of the available retrofit technologies (Davies and be naturally and easily understood,whereas the role of the occu- Osmani,2011:Miller and Buys,2008).Most of these research piers is often underestimated (Karvonen,2013).Juan et al.(2009) findings were obtained by analyzing the problem from technical, indicated that the influence of the occupiers makes the retrofit economic,and environmental perspectives.Only a few studies have more difficult and risky than new buildings because cooperation explored the behaviors of the main stakeholders,who may directly and participation of occupiers are required in an existing building decide whether a building retrofit can be implemented.In practice, retrofit (Miller and Buys,2008).In new buildings,the clients,who the owners and occupiers are the critical direct stakeholders in will become the building owners after construction,can decide by green retrofit at the initial intention phase.However,these in- themselves,whereas in retrofit,the owners have to consider oc- dividuals may have varying and conflicting opinions on whether a cupiers because of their lease contracts.The satisfaction of the building should be retrofitted and when and how the retrofit will occupiers can directly influence the occupancy rate,rent,and be implemented.Few studies,if not none,have investigated the owner reputation in the future.In addition to economic influence. decision behaviors of the occupiers and owners under different the actions of the occupiers are identified as major determinants of interaction relationships.Therefore,the logic for reluctance to energy consumption(Azar and Menassa,2012.2014).The occupiers conduct green retrofit activities in the industry remains unknown. can affect the energy consumption difference by up to 100% This study aims to reveal the underlying logic of the industry's through different behaviors,such as ventilation habits,indoor reluctance to conduct green retrofit by analyzing the behaviors of temperature setting behavior,and after-hour lighting use (Urge- owners and occupiers at the initial phase.This study differs from Vorsatz et al.,2009).Consequently.the occupiers are another the previous ones because instead of identifying the willingness of essential stakeholders in green retrofit projects.Numerous owners the stakeholders or the retrofit-related problems through a survey. and occupiers intend to carry out green retrofit,but,most of them it explores the behaviors of the direct decision makers under the are interrupted at the beginning because a consensus cannot be current market constraints through a game analysis.Modeling the reached.Ma et al.(2012)presented that the phase of deciding retrofit decision behaviors of the stakeholders under different whether to retrofit buildings,which is before the design phase,is scenarios with game theory can be an efficient means to properly the key phase of a sustainable building retrofit.Thus,answering the identify the underlying logic.The rest of the paper is organized into question of whether or not to retrofit a building by analyzing the eight sections.Section 2 critically reviews the literature on stake- interrelations between the owners and occupiers at the first phase holders in green retrofit and the relevant motivations and barriers. is fundamental. Section 3 describes the research methodology.Sections 4,5.and 6 The conventional studies related to the stakeholder analysis in introduce the specific game analysis in the different scenarios of green retrofit mainly focused on the owners and designers involved occupancy types.Section 7 comprehensively discusses the analytic in the energy assessment and design phase (Ali et al.,2008:Stiess results.Section 8 concludes the study and presents recommenda- and Dunkelberg.2013).However,a few recent studies have tions for future research examined the occupiers of existing buildings and their relationship with owners.Stephan and Menassa(2013)proposed an agent- 2.Literature review based model to analyze the social network interactions among the stakeholders(i.e.,owner,occupier,architect,and contractor)of 2.1.Critical stakeholders in green retrofit commercial buildings.In their subsequent study.Stephan and Menassa (2014)emphasized that the network structure and the The stakeholders in green retrofit are the people who,directly or confidence level of the stakeholders could significantly influence indirectly,have vested interests in a building and in the outcome of their own alignment toward a unified retrofit objective.This agent-

require retrofitting 15% of the total number of the existing buildings to improve energy efficiency by 2015 compared with the 2003 baseline (EPA, 2005). Approximately 30 billion US dollars are ear￾marked to conduct green retrofit projects for the existing buildings and facilities. In 2010, the UK government launched the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme to save 1.2 million tons of CO2 emissions annually by 2020. This scheme mo￾tivates the consumers to consider energy efficiency options and to invest in building retrofit projects. Similarly, the Chinese govern￾ment has introduced various policies. Chinese 12th Five-Year Plan stipulated that 400 million m2 residential buildings and 60 million m2 public buildings are planned to be retrofitted as pilot projects between 2011 and 2015 to improve building energy efficiency. By contrast, green retrofit projects remain inadequately pursued in the industries. After the 2008 global economic recession, this situation was further exacerbated by the challenge of ensuring the financial support for retrofit activities (Menassa, 2011). Some pilot studies have revealed that the industries are unenthusiastic about green retrofit primarily because of the following aspects: the highly complex design analysis and solution (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Lapinski et al., 2006), intense inter￾disciplinary collaboration (Korkmaz et al., 2010; Lapinski et al., 2006), long payback periods (Kasivisvanathan et al., 2012; Menassa, 2011), financial problem (e.g., limited access to capital, high cost, etc.) (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Xu et al., 2011), lack of retrofit experience (Ali et al., 2008; Kasivisvanathan et al., 2012; Korkmaz et al., 2010), and lack of understanding of the available retrofit technologies (Davies and Osmani, 2011; Miller and Buys, 2008). Most of these research findings were obtained by analyzing the problem from technical, economic, and environmental perspectives. Only a few studies have explored the behaviors of the main stakeholders, who may directly decide whether a building retrofit can be implemented. In practice, the owners and occupiers are the critical direct stakeholders in green retrofit at the initial intention phase. However, these in￾dividuals may have varying and conflicting opinions on whether a building should be retrofitted and when and how the retrofit will be implemented. Few studies, if not none, have investigated the decision behaviors of the occupiers and owners under different interaction relationships. Therefore, the logic for reluctance to conduct green retrofit activities in the industry remains unknown. This study aims to reveal the underlying logic of the industry's reluctance to conduct green retrofit by analyzing the behaviors of owners and occupiers at the initial phase. This study differs from the previous ones because instead of identifying the willingness of the stakeholders or the retrofit-related problems through a survey, it explores the behaviors of the direct decision makers under the current market constraints through a game analysis. Modeling the retrofit decision behaviors of the stakeholders under different scenarios with game theory can be an efficient means to properly identify the underlying logic. The rest of the paper is organized into eight sections. Section 2 critically reviews the literature on stake￾holders in green retrofit and the relevant motivations and barriers. Section 3 describes the research methodology. Sections 4, 5, and 6 introduce the specific game analysis in the different scenarios of occupancy types. Section 7 comprehensively discusses the analytic results. Section 8 concludes the study and presents recommenda￾tions for future research. 2. Literature review 2.1. Critical stakeholders in green retrofit The stakeholders in green retrofit are the people who, directly or indirectly, have vested interests in a building and in the outcome of a potential and ongoing green retrofit project (Gucyeter and Gunaydin, 2012). The main stakeholders identified by the litera￾ture include the client/owner, occupier/tenant, facilities manager, consultant/designer, contractor, subcontractor, supplier, govern￾ment, financial institutions, energy service companies, environ￾mental organization, professional association, media, public, labor union, and researcher/educator (Gultekin et al., 2013; Juan et al., 2009; Kaklauskas et al., 2004, 2008; Miller and Buys, 2008; Yang and Zou, 2014), which are shown in Fig. 1. Previous studies asser￾ted that the process of green retrofit projects can normally be divided into five phases, namely, the 1) initial intention or setup, 2) pre-retrofit survey and energy performance assessment, 3) design, 4) site implementation, and 5) validation and verification (Lapinski et al., 2006; Ma et al., 2012). Various stakeholders are involved in green retrofit projects in the different phase (see Fig. 1). For example, the energy consultants are normally involved in the pre￾retrofit survey and energy performance assessment phase, whereas the designers and contractors participate in the project at the design and implementation phases. The owners and occupiers play important roles in making green retrofit decisions, particularly at the very early stage, namely, initial intention or setup phase (Liang et al., 2015). In this phase, normally only the owners and occupiers are involved, who propose pre￾liminary retrofit plans and exchange opinions regarding retrofit. These stakeholders can decide whether to launch a retrofit project and to continue to the next steps of energy audit, design, and implementation. The important role of owners in green retrofit can be naturally and easily understood, whereas the role of the occu￾piers is often underestimated (Karvonen, 2013). Juan et al. (2009) indicated that the influence of the occupiers makes the retrofit more difficult and risky than new buildings because cooperation and participation of occupiers are required in an existing building retrofit (Miller and Buys, 2008). In new buildings, the clients, who will become the building owners after construction, can decide by themselves, whereas in retrofit, the owners have to consider oc￾cupiers because of their lease contracts. The satisfaction of the occupiers can directly influence the occupancy rate, rent, and owner reputation in the future. In addition to economic influence, the actions of the occupiers are identified as major determinants of energy consumption (Azar and Menassa, 2012, 2014). The occupiers can affect the energy consumption difference by up to 100% through different behaviors, such as ventilation habits, indoor temperature setting behavior, and after-hour lighting use (Ürge￾Vorsatz et al., 2009). Consequently, the occupiers are another essential stakeholders in green retrofit projects. Numerous owners and occupiers intend to carry out green retrofit, but, most of them are interrupted at the beginning because a consensus cannot be reached. Ma et al. (2012) presented that the phase of deciding whether to retrofit buildings, which is before the design phase, is the key phase of a sustainable building retrofit. Thus, answering the question of whether or not to retrofit a building by analyzing the interrelations between the owners and occupiers at the first phase is fundamental. The conventional studies related to the stakeholder analysis in green retrofit mainly focused on the owners and designers involved in the energy assessment and design phase (Ali et al., 2008; Stiess and Dunkelberg, 2013). However, a few recent studies have examined the occupiers of existing buildings and their relationship with owners. Stephan and Menassa (2013) proposed an agent￾based model to analyze the social network interactions among the stakeholders (i.e., owner, occupier, architect, and contractor) of commercial buildings. In their subsequent study, Stephan and Menassa (2014) emphasized that the network structure and the confidence level of the stakeholders could significantly influence their own alignment toward a unified retrofit objective. This agent￾X. Liang et al. / Journal of Cleaner Production 137 (2016) 1300e1312 1301

1302 X.Liang et aL Journal of Cleaner Production 137(2016)1300-1312 Phases and Processes Internal External Stakeholders Stakeholders Propose intentions of retrofit; Define objectives and expectations; Owner. Initial intention Exchange attitudes towards retrofit. Occupier. setup Government <Retrofit?No End Policy: 2 IYes Standard: Pre-retrofit survey: Energy Financial Pre-retrofit survey Data collection and energy consultant; institution/bank and energy commitment; performance assessment: Facility performance Goal and target establishment. manager Financial assessment Support; Energy service <Confirmed?N End company Yes Energy service: Quantify retrofit measures: Cost-benefit analysis; Influence NGO: Academic Develop action plans; Designer Environmental Design Client review and comments. report; organization Technology <Satisfied?No development: Researcher Yes Contractor; Media; Educator Site Implementation and commissioning Sub-contractor; implementation Supplier. Public 5 Post-retrofit survey; pressure; Professional Retrofit report; Sustainable association Occupier satisfaction evaluation; Validation and development Client review and comments. verification promotion Surveyor: <Satisfied?No Consultant. Media:Labor union;Public IYes Operation Finish retrofit and start regular operation Fig.1.The phases and involved stakeholders in green retrofit projects. based model originally simulated the dynamic opinions of the through the literature review and structured interviews with ex- stakeholders that were influenced by their interactions to allow the perts who are experienced in green retrofit projects.The incentives, adjustment of their values on three dimensions (i.e.,cost,energy, which can be defined as the potential profits of green retrofit,can and comfort)to an optimal retrofit decision.Fuerst and McAllister be classified into three categories,namely,1)direct short-term (2011)analyzed the rent,cost,and price of the buildings that incentives,2)direct long-term incentives,and 3)indirect in- were influenced by green retrofit and tried to define an appropriate centives.The first category refers to the incentives related to the compensation to satisfy both owners and occupiers. economic benefits that can be reaped in a short time,such as high rent,low maintenance cost,and tax reduction.The second category 2.2.Incentives and drivers for the owners and occupiers also refers to economic benefits,but these ones are gained in the long term (i.e..high occupancy rate,asset value raise,and It is important to understand the specific incentives and barriers longevity).The last category includes other incentives related to the for the owners and occupiers as they may have varying and con- social and environmental influence rather than the economic in- flicting opinions on whether a building should be retrofitted and terests.The varying incentives for the owners and occupiers are illustrated in Table 1. when and how the retrofit should be implemented.The owners may be motivated to implement retrofit projects by high rent and occupancy rate (Fuerst and McAllister,2011:Thomas,2010),tax 2.3.Barriers and resistances for the owners and occupiers reduction (Fuerst and McAllister.2011),and reputation enhance- ment (Gucyeter and Gunaydin,2012).Alternatively,the occupiers Other than the aforementioned split incentives,some barriers may be interested in energy cost saving(Ma et al..2012:Newsham (i.e.,cost or potential resistances)exist,and they adversely affect et al.,2009:Rey.2004),low rent(Menassa and Baer.2014),and the decision making in green retrofit projects.Similar to incentives, productivity (Fuerst and McAllister,2011:Thomas,2010;Xu et al.. the main barriers for the owners and occupiers are identified 2011).Conflicts are probably raised when the owners invest in through the literature review and structured interviews.These energy efficiency retrofit,but most direct benefits of energy cost barriers are classified into two categories,namely,the 1)direct/ saving are received by the occupiers. economic barriers,and 2)indirect barriers.The first category de- The main incentives for owners and occupiers are identified notes barriers directly related to the economic problems,such as

based model originally simulated the dynamic opinions of the stakeholders that were influenced by their interactions to allow the adjustment of their values on three dimensions (i.e., cost, energy, and comfort) to an optimal retrofit decision. Fuerst and McAllister (2011) analyzed the rent, cost, and price of the buildings that were influenced by green retrofit and tried to define an appropriate compensation to satisfy both owners and occupiers. 2.2. Incentives and drivers for the owners and occupiers It is important to understand the specific incentives and barriers for the owners and occupiers as they may have varying and con- flicting opinions on whether a building should be retrofitted and when and how the retrofit should be implemented. The owners may be motivated to implement retrofit projects by high rent and occupancy rate (Fuerst and McAllister, 2011; Thomas, 2010), tax reduction (Fuerst and McAllister, 2011), and reputation enhance￾ment (Gucyeter and Gunaydin, 2012). Alternatively, the occupiers may be interested in energy cost saving (Ma et al., 2012; Newsham et al., 2009; Rey, 2004), low rent (Menassa and Baer, 2014), and productivity (Fuerst and McAllister, 2011; Thomas, 2010; Xu et al., 2011). Conflicts are probably raised when the owners invest in energy efficiency retrofit, but most direct benefits of energy cost saving are received by the occupiers. The main incentives for owners and occupiers are identified through the literature review and structured interviews with ex￾perts who are experienced in green retrofit projects. The incentives, which can be defined as the potential profits of green retrofit, can be classified into three categories, namely, 1) direct short-term incentives, 2) direct long-term incentives, and 3) indirect in￾centives. The first category refers to the incentives related to the economic benefits that can be reaped in a short time, such as high rent, low maintenance cost, and tax reduction. The second category also refers to economic benefits, but these ones are gained in the long term (i.e., high occupancy rate, asset value raise, and longevity). The last category includes other incentives related to the social and environmental influence rather than the economic in￾terests. The varying incentives for the owners and occupiers are illustrated in Table 1. 2.3. Barriers and resistances for the owners and occupiers Other than the aforementioned split incentives, some barriers (i.e., cost or potential resistances) exist, and they adversely affect the decision making in green retrofit projects. Similar to incentives, the main barriers for the owners and occupiers are identified through the literature review and structured interviews. These barriers are classified into two categories, namely, the 1) direct/ economic barriers, and 2) indirect barriers. The first category de￾notes barriers directly related to the economic problems, such as Fig. 1. The phases and involved stakeholders in green retrofit projects. 1302 X. Liang et al. / Journal of Cleaner Production 137 (2016) 1300e1312

X.Liang et aL Journal of Cleaner Production 137(2016)1300-1312 1303 Table 1 The incentives of owners and occupiers in green retrofit Stakeholders Direct short-term incentives Direct long-term incentives Indirect incentives Owners Dow1:Higher rent Dow5:Higher occupancy rate Dow9:Reputation enhancement (Fuerst and McAllister,2011:Thomas,2010) (Fuerst and McAllister.2011: (Gucveter and Gunavdin 2012) Dow2:Lower maintenance cost Ma et al,2012:Thomas.2010) Dow10:Social responsibility (Alanne.2004:Lapinski et al.2006: Dow6:Risks reduction (Davies and Osmani,2011) Ouyang et al,2011:Rey.2004) (avoid premature obsolescence,energy cost increasing) Dow11:Occupiers satisfaction Dow3:Subsidies/tax reduction (Fuerst and McAllister,2011) (Thomas,2010:Xu et al.,2011) (Fuerst and McAllister,2011:Ouyang et al.,2011) Dow7:Longevity (Kaklauskas et aL,2004: Dow4:Return on investment (ROl) Mickaityte et al,2008) (Entrop et al,2010:Kaklauskas et al,2004: Dow8:Asset value raise (Miller and Buys,2008) Miller and Buys,2008) Occupiers Doc1:Lower total cost Doc2:Productivity improvement Doc3:Comfort enhancement (including potentially higher rent (Fuerst and McAllister.2011:Lapinski et al,2006: (Wang et aL,2010:Xu et aL,2011) and lower energy cost) Thomas,2010:Xu et al,2011) Doc4:Social responsibility (Caccavelli and Gugerli,2002: (Davies and Osmani,2011) Juan et al,2010:Newsham et al..2009:Rey,2004) high retrofit cost,finite capital,and long payback periods.The buildings,the occupiers are the main stakeholders in the green second category refers to the barriers indirectly related to economy. retrofit for existing buildings,which can be classified into three such as lack of building information,and highly complex design categories according to occupancy type,namely,owner-occupied. analysis and solution.The specific barriers for the owners and oc- single-occupied (not by owner).and multi-occupied (Rhoads. cupiers are shown in Table 2. 2010).These occupancy types can influence the position and po- wer of the stakeholders,benefit distribution,transaction cost,and 2.4.Summary of the review other factors in decision making.In the case of owner-occupied buildings the owners can make decisions completely by them- The abovementioned studies (Fuerst and McAllister,2011: selves.The single-occupied buildings are rented to a single tenant. Stephan and Menassa,2013,2014)are helpful in understanding probably a company or institute in a relatively large scale.The the important roles of the owners and occupiers and their varying single tenants significantly influence the profit of the building interests in green retrofit.However,understanding alone is not owners and therefore have relatively high negotiation capabilities. sufficient to reveal the underlying logic of the industry's reluctance A retrofit decision must be agreed to by the single occupier. otherwise,the decision becomes difficult to implement.The multi- to conduct green retrofit.The shortcomings of the existing studies are explained in the succeeding paragraphs occupied buildings are occupied by numerous tenants who are First,the existing studies generally overlooked the role of the commonly in a small scale.Every occupier only rents a small part of owners and occupiers in green retrofit at the initial phase.Many the building,and the rent from an individual occupier is not suffi- green retrofit plans were canceled at the beginning stage because of cient to influence the profit of owners.In this case,the owner controversies among the owners and occupiers.Therefore,the dominates the decision-making process,as such,if small occupiers behaviors of the owners and occupiers at the initial phase must be do not agree with the owner,they can only choose to "vote with their feet,"that is,to terminate the contract and move out.Based on re-examined to clearly identify the underlying reasons.Focusing on one phase of green retrofit can also help decompose and simplify the above analysis,the influences of occupancy types on the green the decision-making problems as well as achieve relatively accurate retrofit decisions at the initial phase must not be overlooked. Finally,existing studies mainly focused on the effects of cost. results. Second,the existing studies disregarded the complicated be- energy saving,and comfort on green retrofit(Stephan and Menassa. haviors of the owners and occupiers under different interaction 2014).However,some other factors likewise play important roles in relationships,or different occupancy types.Unlike the case of new green retrofit decisions,such as reputation enhancement,risk Table 2 The barriers of owners and occupiers in green retrofit Stakeholders Direct/Economic barriers Indirect barriers Owners Bow1:High retrofit cost Bow6:Highly complex design (Lapinski et al.2006;Menassa,2011:Xu et al,2011) analysis and solution(Davies and Osmani,2011: Bow2:Long payback periods Kasivisvanathan et al.,2012:Lapinski et al.,2006) (Kasivisvanathan et al.,2012:Menassa.2011) Bow7:Lack of building information Bow3:Finite capital (Davies and Osmani,2011: (Davies and osmani 2011 Kasivisvanathan et aL,2012;Menassa,2011: Kasivisvanathan et al.,2012:Menassa,2011) Stiess and Dunkelberg.2013) Bow8:Lack of retrofit experience Bow4:Interruptions in operations (Ali et al,2008:Korkmaz et al,2010) (Kasivisvanathan et al,2012:Miller and Buys,2008) Bow5:Risk of retrofits (Menassa,2011) Occupiers Boc1:Higher rent (Fuerst and McAllister,2011:Thomas,2010) Boc4:Lack of understanding or interest Boc2:Interruptions in operations(Kasivisvanathan et al..2012: about environment(Davies and Osmani.2011) Miller and Buys,2008) Boc5:Lack of information (Davies and Osmani,2011: Boc3:Risk of retrofits Kasivisvanathan et al,2012:Menassa,2011) (energy may not be saved by retrofit)(Menassa.2011) Boc6:Possibility of relocation (occupiers may not bear interruptions or higher rent) (Fuerst and McAllister.2011)

high retrofit cost, finite capital, and long payback periods. The second category refers to the barriers indirectly related to economy, such as lack of building information, and highly complex design analysis and solution. The specific barriers for the owners and oc￾cupiers are shown in Table 2. 2.4. Summary of the review The abovementioned studies (Fuerst and McAllister, 2011; Stephan and Menassa, 2013, 2014) are helpful in understanding the important roles of the owners and occupiers and their varying interests in green retrofit. However, understanding alone is not sufficient to reveal the underlying logic of the industry's reluctance to conduct green retrofit. The shortcomings of the existing studies are explained in the succeeding paragraphs. First, the existing studies generally overlooked the role of the owners and occupiers in green retrofit at the initial phase. Many green retrofit plans were canceled at the beginning stage because of controversies among the owners and occupiers. Therefore, the behaviors of the owners and occupiers at the initial phase must be re-examined to clearly identify the underlying reasons. Focusing on one phase of green retrofit can also help decompose and simplify the decision-making problems as well as achieve relatively accurate results. Second, the existing studies disregarded the complicated be￾haviors of the owners and occupiers under different interaction relationships, or different occupancy types. Unlike the case of new buildings, the occupiers are the main stakeholders in the green retrofit for existing buildings, which can be classified into three categories according to occupancy type, namely, owner-occupied, single-occupied (not by owner), and multi-occupied (Rhoads, 2010). These occupancy types can influence the position and po￾wer of the stakeholders, benefit distribution, transaction cost, and other factors in decision making. In the case of owner-occupied buildings the owners can make decisions completely by them￾selves. The single-occupied buildings are rented to a single tenant, probably a company or institute in a relatively large scale. The single tenants significantly influence the profit of the building owners and therefore have relatively high negotiation capabilities. A retrofit decision must be agreed to by the single occupier, otherwise, the decision becomes difficult to implement. The multi￾occupied buildings are occupied by numerous tenants who are commonly in a small scale. Every occupier only rents a small part of the building, and the rent from an individual occupier is not suffi- cient to influence the profit of owners. In this case, the owner dominates the decision-making process, as such, if small occupiers do not agree with the owner, they can only choose to “vote with their feet,” that is, to terminate the contract and move out. Based on the above analysis, the influences of occupancy types on the green retrofit decisions at the initial phase must not be overlooked. Finally, existing studies mainly focused on the effects of cost, energy saving, and comfort on green retrofit (Stephan and Menassa, 2014). However, some other factors likewise play important roles in green retrofit decisions, such as reputation enhancement, risk Table 1 The incentives of owners and occupiers in green retrofit. Stakeholders Direct short-term incentives Direct long-term incentives Indirect incentives Owners DOW1: Higher rent (Fuerst and McAllister, 2011; Thomas, 2010) DOW2: Lower maintenance cost (Alanne, 2004; Lapinski et al., 2006; Ouyang et al., 2011; Rey, 2004) DOW3: Subsidies/tax reduction (Fuerst and McAllister, 2011; Ouyang et al., 2011) DOW4: Return on investment (ROI) (Entrop et al., 2010; Kaklauskas et al., 2004; Miller and Buys, 2008) DOW5: Higher occupancy rate (Fuerst and McAllister, 2011; Ma et al., 2012; Thomas, 2010) DOW6: Risks reduction (avoid premature obsolescence, energy cost increasing) (Fuerst and McAllister, 2011) DOW7: Longevity (Kaklauskas et al., 2004; Mickaityte et al., 2008) DOW8: Asset value raise (Miller and Buys, 2008) DOW9: Reputation enhancement (Gucyeter and Gunaydin, 2012) DOW10: Social responsibility (Davies and Osmani, 2011) DOW11: Occupiers satisfaction (Thomas, 2010; Xu et al., 2011) Occupiers DOC1: Lower total cost (including potentially higher rent and lower energy cost) (Caccavelli and Gugerli, 2002; Juan et al., 2010; Newsham et al., 2009; Rey, 2004) DOC2: Productivity improvement (Fuerst and McAllister, 2011; Lapinski et al., 2006; Thomas, 2010; Xu et al., 2011) DOC3: Comfort enhancement (Wang et al., 2010; Xu et al., 2011) DOC4: Social responsibility (Davies and Osmani, 2011) Table 2 The barriers of owners and occupiers in green retrofit. Stakeholders Direct/Economic barriers Indirect barriers Owners BOW1: High retrofit cost (Lapinski et al., 2006; Menassa, 2011; Xu et al., 2011) BOW2: Long payback periods (Kasivisvanathan et al., 2012; Menassa, 2011) BOW3: Finite capital (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Menassa, 2011; Stiess and Dunkelberg, 2013) BOW4: Interruptions in operations (Kasivisvanathan et al., 2012; Miller and Buys, 2008) BOW5: Risk of retrofits (Menassa, 2011) BOW6: Highly complex design analysis and solution (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Lapinski et al., 2006) BOW7: Lack of building information (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Menassa, 2011) BOW8: Lack of retrofit experience (Ali et al., 2008; Korkmaz et al., 2010) Occupiers BOC1: Higher rent (Fuerst and McAllister, 2011; Thomas, 2010) BOC2: Interruptions in operations (Kasivisvanathan et al., 2012; Miller and Buys, 2008) BOC3: Risk of retrofits (energy may not be saved by retrofit) (Menassa, 2011) BOC4: Lack of understanding or interest about environment (Davies and Osmani, 2011) BOC5: Lack of information (Davies and Osmani, 2011; Kasivisvanathan et al., 2012; Menassa, 2011) BOC6: Possibility of relocation (occupiers may not bear interruptions or higher rent) (Fuerst and McAllister, 2011) X. Liang et al. / Journal of Cleaner Production 137 (2016) 1300e1312 1303

1304 X.Liang et aL Journal of Cleaner Production 137 (2016)1300-1312 reduction,and transaction costs.In particular,some large-scale motivation and engagement of people even under incentive pol- companies attach significant importance to reputation and risk. icies.To determine the reasons underlying this problem,this study According to our interview,public influence and reputation limits the research scope to the owners and occupiers at the initial enhancement are assigned the highest priority in the green retrofit phase.The behaviors of these decision makers are specified in project of China Recourse Headquarter in Hong Kong,which was Sections 1 and 2. completed in 2012. Second,this study analyzes the main possible influential factors The abovementioned limitations present difficulties in under- of green retrofit decisions by conducting literature review and standing why the existing identified reasons would result in the expert interview.A series of semi-structured interviews are con- reluctance to implement green retrofit in the industry.To mitigate ducted with 19 experts from Hong Kong and Mainland China,who such deficiency.this study aims to reveal the underlying logic of have participated in green retrofit projects as project manager, industry's reluctance to conduct green retrofit by analyzing the designer,facility manager,contract manager,contractor,and third- behaviors of owners and occupiers at the initial phase.This study party consultant authorized by the government to audit projects. differs from the previous ones in that it explores the behaviors of The analysis results are discussed in Section 2. the direct decision makers under current market constraints Third,the identified problem in reality is mapped to a theoret- through game analysis,rather than identifying the willingness of ical model by game theory.Most owners and occupiers prefer to the stakeholders or retrofit-related problems through survey.The show their positive attitudes rather than reluctance towards green factors affecting the behaviors of these decision makers,including retrofit to the public.This condition explains why the major cases in economic,environmental,and social factors,in the short and long the existing studies are successful retrofit projects.Constrained by terms are systemically analyzed and selected based on the litera- such realities,we adopt game theory to investigate the research ture review.Game theory is used to model the behaviors of the question using theoretical model and logical deduction rather than owners and occupiers under different occupancy types.The results an empirical study.The data for the game analysis are primarily of this study are critical to the analysis of the feasibility of a building obtained from the existing studies and interviews about real cases. retrofit and may serve as a foundation for formulating more energy This process is useful in overcoming the shortages of limited data as efficiency strategies and policies. a relative value rather than absolute value that is needed in the game analysis.The probable decisions of the owners and occupiers 3.Methodology under the three occupancy types are discussed in Sections 4-6. Finally,the result interpretations and uncertainty discussion are 3.1.Research design presented in Section 7.The conclusions and limitations of this study are emphasized in Section 8. To fulfill the research aim,this study is conducted with four procedures,which are demonstrated in Fig.2. 3.2.Game theory First,this study identifies the research problem and research gap through the literature review.The relevant literature asserts Game theory is used to model the decision behaviors of owners that,a key problem in promoting green retrofit is the low and occupiers in green retrofit.Previous studies have determined Steps Methods/Tools Outcomes Step 1 Identifying the Research problem: research problem and Literature review Research objectives; research gap Key stakeholders Step 2 Analyzing the impact Expert interview: Occupancy types; factors Literature review Incentives and divers Barriers and resistances Step 3 Mapping the real Nash Equilibrium under problem to theoretical Game theory different occupancy model types Step 4 Discussing the Inductive Result interpretations analysis results interpretation and suggestions; Future directions Fig.2.Schematic of research process

reduction, and transaction costs. In particular, some large-scale companies attach significant importance to reputation and risk. According to our interview, public influence and reputation enhancement are assigned the highest priority in the green retrofit project of China Recourse Headquarter in Hong Kong, which was completed in 2012. The abovementioned limitations present difficulties in under￾standing why the existing identified reasons would result in the reluctance to implement green retrofit in the industry. To mitigate such deficiency, this study aims to reveal the underlying logic of industry's reluctance to conduct green retrofit by analyzing the behaviors of owners and occupiers at the initial phase. This study differs from the previous ones in that it explores the behaviors of the direct decision makers under current market constraints through game analysis, rather than identifying the willingness of the stakeholders or retrofit-related problems through survey. The factors affecting the behaviors of these decision makers, including economic, environmental, and social factors, in the short and long terms are systemically analyzed and selected based on the litera￾ture review. Game theory is used to model the behaviors of the owners and occupiers under different occupancy types. The results of this study are critical to the analysis of the feasibility of a building retrofit and may serve as a foundation for formulating more energy efficiency strategies and policies. 3. Methodology 3.1. Research design To fulfill the research aim, this study is conducted with four procedures, which are demonstrated in Fig. 2. First, this study identifies the research problem and research gap through the literature review. The relevant literature asserts that, a key problem in promoting green retrofit is the low motivation and engagement of people even under incentive pol￾icies. To determine the reasons underlying this problem, this study limits the research scope to the owners and occupiers at the initial phase. The behaviors of these decision makers are specified in Sections 1 and 2. Second, this study analyzes the main possible influential factors of green retrofit decisions by conducting literature review and expert interview. A series of semi-structured interviews are con￾ducted with 19 experts from Hong Kong and Mainland China, who have participated in green retrofit projects as project manager, designer, facility manager, contract manager, contractor, and third￾party consultant authorized by the government to audit projects. The analysis results are discussed in Section 2. Third, the identified problem in reality is mapped to a theoret￾ical model by game theory. Most owners and occupiers prefer to show their positive attitudes rather than reluctance towards green retrofit to the public. This condition explains why the major cases in the existing studies are successful retrofit projects. Constrained by such realities, we adopt game theory to investigate the research question using theoretical model and logical deduction rather than an empirical study. The data for the game analysis are primarily obtained from the existing studies and interviews about real cases. This process is useful in overcoming the shortages of limited data as a relative value rather than absolute value that is needed in the game analysis. The probable decisions of the owners and occupiers under the three occupancy types are discussed in Sections 4e6. Finally, the result interpretations and uncertainty discussion are presented in Section 7. The conclusions and limitations of this study are emphasized in Section 8. 3.2. Game theory Game theory is used to model the decision behaviors of owners and occupiers in green retrofit. Previous studies have determined Methods/Tools Research problem; Research objectives; Key stakeholders Steps Identifying the research problem and research gap Analyzing the impact factors Mapping the real problem to theoretical model Discussing the analysis results Literature review Expert interview; Literature review Game theory Inductive interpretation Outcomes Occupancy types; Incentives and divers; Barriers and resistances Nash Equilibrium under different occupancy types Result interpretations and suggestions; Future directions Step 1 Step 2 Step 3 Step 4 Fig. 2. Schematic of research process. 1304 X. Liang et al. / Journal of Cleaner Production 137 (2016) 1300e1312