Impact of Industry 4.0 Digital Technologies on Optimal Construction Strategies: Owner Preference Perspective on Construction Service Perception and Unreliability Costs

Prefabricated construction, recognized as a sustainable and efficient construction method, is increasingly popular due to its potential to mitigate climate change. However, assessing its profitability and effectively utilizing Industry 4.0 digital technologies necessitates strategic stakeholder engagement. This study examines contractors’ optimal construction strategies—traditional, prefabricated, or hybrid—under heterogeneous owner preferences, specifically construction service perception and unreliability costs. A game-theoretic model is developed to characterize the interaction between contractors and owners. The findings indicate that the optimal construction strategy is influenced by the owner’s construction service perception (associated with traditional construction) and the costs of unreliability (associated with prefabricated construction). Specifically, when these factors are moderate, a hybrid strategy that integrates prefabricated and traditional construction is most effective. Conversely, when unreliability costs and construction service perceptions are either high or low, contractors should opt for either purely traditional or purely prefabricated construction. Digital technologies play a dual role in promoting prefabrication. Contractors are more inclined to adopt prefabricated construction when digital technologies significantly reduce the owner’s unreliability costs; otherwise, they are less likely to embrace prefabrication. This study contributes by incorporating customer preference theory into a construction strategy model and analyzing how Industry 4.0 technologies influence contractor decisions. Practically, enhancing owner preferences and improving digital technologies capabilities are key to promoting prefabrication. These findings emphasize the practical application of game theory models in addressing sustainability in the construction industry, providing insights to promote prefabricated construction practices and management from a new perspective of owner preferences.