Optimal Tri-Level Government-Manufacturers-Contractors Subsidy Plan: Maximizing Local Prefabricated Product Usage and Minimizing Transport Emissions

Prefabrication is an advanced construction approach that has drawn increasing attention from the construction industry. Governments worldwide have begun to offer subsidies to establish local prefabrication factories (LPFs) to increase the uptake of prefabrication and decrease the transport emissions of prefabricated components (PCs). The establishment of LPFs needs to comprehensively consider numerous factors, such as the large investment required for factory construction, the limited subsidies available, and the tri-level mechanism involving government, manufacturers, and contractors. However, current subsidy programs primarily focus on the relationship between government and manufacturers, with less emphasis on the interactive responses of contractors. This study designs an optimal tri-level government–manufacturer–contractor subsidy plan. The proposed methodology is validated through a case study of Hong Kong, which can be applied to other countries and regions for the formulation of tailored subsidy policies. The results show that high cost is the greatest deterrent to LPF establishment. Although subsidies are oriented toward manufacturers, contractors can also benefit from such incentives. When manufacturers receive subsidies, they are motivated to offer competitive PC prices, enabling contractors to procure PCs at more favorable prices. Overall, the research findings are expected to promote the sustainable development of the construction industry.