A microeconomic model of market equilibrium in project activity

Abstract

The article focuses on the development of a microeconomic mathematical model of market equilibrium in project activity. In the context of growing competition for resources and increasing requirements for investment efficiency, the issue of pricing in the resource market and the market for project outcomes becomes particularly relevant. Despite the recognition of a project as a full microeconomic entity — a temporary firm — the market equilibrium mechanism as applied to project systems has not yet received systematic mathematical formalization. This gap between microeconomic theory and project management practice determines the necessity of this study.

The classical Marshallian framework has been adapted to the specifics of project systems through modification of resource supply and demand functions: an explicit time constraint T and a stochastic uncertainty factor ε ~ N(0, σ²ε) have been introduced, reflecting the fundamental differences between a project and a traditional firm. Analytical expressions for equilibrium prices in both the resource market and the market for project outcomes have been derived. It has been proven that increasing time pressure reduces the equilibrium resource price, while increasing capital intensity raises it. The break-even condition has been formalized accounting for project-specific costs absent in standard microeconomic cost functions. A proportional relationship between deviations of actual resource prices from equilibrium and earned value indicators has been established.

The result of the study is an integrated equilibrium model as a system of four equations simultaneously covering both markets, the optimality condition, and the financial efficiency criterion. The scientific novelty lies in the first systematic formalization of the equilibrium pricing mechanism for project systems. The material is of interest to researchers in project management and microeconomic theory, as well as practitioners engaged in investment project performance evaluation.