X.Liang et aL Journal of Cleaner Production 137(2016)1300-1312 1307 Occupier Initiative to retrofit Reluctant to retrofit B-S+AVARAP--CH Bm2=S2+Ar+△P-Ig-C0 Initiative to retrofit B2-Sm+△P-DT-AR1 Bac2-Sc2+AP2-D2 Reluctant to BSAAP B22=0 retrofit B01=S2,+A-D-I份 BC2=0 Fig.4.The payoff matrix for owner and occupier in single-occupied building. retrofit during the contract period.To sum up,regardless of the the single occupier generally has a long rental contract,which initiative of the occupier to implement green retrofit,green retrofit makes possible for reaping returns on investment to cover the is implemented only if the owner wants to. retrofit cost.However,the costs of retrofit,which are investment The benefit and cost of green retrofit are similar in two condi- and disturbance of business during retrofitDs,are short term and tions,but the difference is whether an increment exists in rent after definite,whereas the profits of retrofit,which are energy cost retrofit.According to previous case studies,rent,price,and occu- saving S.and public impact AP.are long term and uncertain.In pancy rate of a building are positively related to its green feature,as addition.energy saving is not reliable because of the contract shown in Table 5.Therefore,this study assumes that green retrofit period.Rent contract may be terminated in several years,which could raise building value(Miller and Buys.2008),occupancy rate, means the occupier can only obtain S for several years rather and rent(Thomas,2010).The key information can be summarized than for the whole life cycle of a building.Specifically,the duration as follows: of reaping profit may be shorter than payback time.Given that most investors are often reluctant to take challenges(Rhoads,2010),they S1+△P9-D8=S92+AP8-D8,△R011≥0 (2) tend to assign more weight to certain cost in the short term than to Referring these data to the formula in Fig.4.the matrix reveals uncertain profit in the long term.The key information can be that. summarized as follows: S81+△P骝-D9-AR11≤S92+AP8-D2, (3) S21+AP%-D2-≤0，B%222=0 (5) Or namely. B11≤B212 (4) B821≤B822 (6) According to Formula(4),the occupier should choose"reluctant According to Formula(6),the occupier should choose "reluctant to retrofit"or non-operation if the owner has the initiative to to retrofit"when the owner is reluctant to green retrofit because of implement green retrofit. the risk in payback period. Based on Formulas(4)and(6),the best interests of the occupier are served by the "reluctant to retrofit"action regardless of the 5.2.The action of the occupier when the owner is reluctant to action the owner takes,which means "reluctant to retrofit"is the retrofit dominant strategy for the occupier(Myerson,2013).Therefore,the action of the owner is discussed in the following section based on If both the owner and the occupier are reluctant,the building the situation where the occupier is reluctant to retrofit. operates without the innovation.Thus,neither cost nor profit exists according to green retrofit,that is,B=0.In the situation where 5.3.The action of the owner when the occupier is reluctant to the owner is reluctant and does not want to invest,but the occupier retrofit is active in sustainable development,the occupier can choose to invest in the retrofit project.The single occupier is mainly a large As mentioned earlier,if the owner and the occupier are reluctant organization that has high economic strength to support green to green retrofit,then green retrofit is not implemented.and the retrofit (Miller and Buys,2008).In addition to economic strength. owner obtains neither cost nor profit,such that B22=0.If the Table 5 The premium of rent.value and occupancy rate in green buildings. Literature Rental premium Value premium Occupancy rate premium Miller et al.(2008) 9 No premium 2-4% Eichholtz et al.(2010) 33% 19% NA Pivo and Fisher (2010) 2.7% 8.5% NA Wiley et aL.(2010) 7-17% NA 10-18% Fuerst and McAllister (2011) 4-5% 25-26% 1-3%retrofit during the contract period. To sum up, regardless of the initiative of the occupier to implement green retrofit, green retrofit is implemented only if the owner wants to. The benefit and cost of green retrofit are similar in two condi￾tions, but the difference is whether an increment exists in rent after retrofit. According to previous case studies, rent, price, and occu￾pancy rate of a building are positively related to its green feature, as shown in Table 5. Therefore, this study assumes that green retrofit could raise building value (Miller and Buys, 2008), occupancy rate, and rent (Thomas, 2010). The key information can be summarized as follows: Sso e11 þ DPso 11 Dso 11zSso e12 þ DPso 12 Dso 12; DRso oc11 0 (2) Referring these data to the formula in Fig. 4, the matrix reveals that. Sso e11 þ DPso 11 Dso 11 DRso oc11  Sso e12 þ DPso 12 Dso 12; (3) Or Bso oc11  Bso oc12 (4) According to Formula (4), the occupier should choose “reluctant to retrofit” or non-operation if the owner has the initiative to implement green retrofit. 5.2. The action of the occupier when the owner is reluctant to retrofit If both the owner and the occupier are reluctant, the building operates without the innovation. Thus, neither cost nor profit exists according to green retrofit, that is, Bso oc22 ¼ 0. In the situation where the owner is reluctant and does not want to invest, but the occupier is active in sustainable development, the occupier can choose to invest in the retrofit project. The single occupier is mainly a large organization that has high economic strength to support green retrofit (Miller and Buys, 2008). In addition to economic strength, the single occupier generally has a long rental contract, which makes possible for reaping returns on investment to cover the retrofit cost. However, the costs of retrofit, which are investment I so 21 and disturbance of business during retrofitDso 21, are short term and definite, whereas the profits of retrofit, which are energy cost saving Sso e21, and public impact DPso 21, are long term and uncertain. In addition, energy saving Sso e21 is not reliable because of the contract period. Rent contract may be terminated in several years, which means the occupier can only obtain Sso e21 for several years rather than for the whole life cycle of a building. Specifically, the duration of reaping profit may be shorter than payback time. Given that most investors are often reluctant to take challenges (Rhoads, 2010), they tend to assign more weight to certain cost in the short term than to uncertain profit in the long term. The key information can be summarized as follows: Sso e21 þ DPso 21 Dso 21 I so 21  0; Bso oc22 ¼ 0 (5) namely, Bso oc21  Bso oc22 (6) According to Formula (6), the occupier should choose “reluctant to retrofit” when the owner is reluctant to green retrofit because of the risk in payback period. Based on Formulas (4) and (6), the best interests of the occupier are served by the “reluctant to retrofit” action regardless of the action the owner takes, which means “reluctant to retrofit” is the dominant strategy for the occupier (Myerson, 2013). Therefore, the action of the owner is discussed in the following section based on the situation where the occupier is reluctant to retrofit. 5.3. The action of the owner when the occupier is reluctant to retrofit As mentioned earlier, if the owner and the occupier are reluctant to green retrofit, then green retrofit is not implemented, and the owner obtains neither cost nor profit, such that Bso ow22 ¼ 0. If the Fig. 4. The payoff matrix for owner and occupier in single-occupied building. Table 5 The premium of rent, value and occupancy rate in green buildings. Literature Rental premium Value premium Occupancy rate premium Miller et al. (2008) 9% No premium 2e4% Eichholtz et al. (2010) 3.3% 1.9% NA Pivo and Fisher (2010) 2.7% 8.5% NA Wiley et al. (2010) 7e17% NA 10e18% Fuerst and McAllister (2011) 4e5% 25e26% 1e3% X. Liang et al. / Journal of Cleaner Production 137 (2016) 1300e1312 1307