Optimal verification strategy for general development plans using a belief‐based approach

Abstract

Verification activities are intended to reduce the costs of system development by identifying design errors before deploying the system. However, subcontractors in multi-firm projects are motivated to implement locally cost-effective verification strategies over verification strategies that benefit the main contractor. Incentivizing verification activities is one mechanism by which the contractor can motivate subcontractors to implement verification strategies desirable to the contractor. In this paper, we present a belief-based modeling concept for determining optimal verification strategies for general development plans. The results show that the optimal incentives are a function of the subordinate firm's beliefs and the influence exerted by the subordinate firm on the supervising firm with respect to verification activities.