Showing papers on "Bidding published in 1971"

The Dollar Auction game: a paradox in noncooperative behavior and escalation

Abstract: There is an extremely simple, highly amusing, and instructive parlor game which can be played at any party by arranging for the auction of a dollar. This game illustrates some of the difficulties with the noncooperative equilibrium concept and games in extensive form (von Neuman and Morgenstern, 1945). The game is simplicity itself and is usually highly profitable to its promoter. The auctioneer auctions off a dollar bill to the highest bidder, with the understanding that both the highest bidder and the second highest bidder will pay. For example, if A has bid 10 cents and B has bid 15 cents, then the auctioneer will obtain 25 cents, pay a dollar to B, and A will be out 10 cents. Suppose that bids must be made in multiples of 5 cents. Furthermore, suppose that the game ends if no one bids for a specific length of time. Ties are resolved in favor of the bidder closest to the auctioneer. These rules completely specify the game except for a finite end rule; i.e., as specified, bidding could conceivably never cease. We could add an upper limit to the amount that anyone is permitted to bid. However, the analysis is confined to the (possibly infinite) game without a specific termination point, as no

Competitive Bidding: A Comprehensive Bibliography

Abstract: This paper lists, alphabetically by first author, over 100 papers and books dealing with competitive bidding.

Some Multi-Contract Decision-Theoretic Competitive Bidding Models

Abstract: This paper reviews the principal public literature concerned with expected-profit decision-theoretic closed-competitive-bidding models. It makes extensions of previous formulations for static multi-contract bidding situations with and without cost dependencies and resource constraints. The same decision model is reformulated to utilize numerical, Lagrange-multiplier, dynamic, and integer linear programming techniques according to the information available to the bidder. A zero-one integer programming formulation is well suited to utilize subjective probabilities of winning estimates. Finally, the paper suggests a format for further development.

Bidding with Competitive Strategy Models

Abstract: This work presents a bidding procedure based on competitive strategy theory. A study comparing the bids yielded by several competitive strategy models with those of actual lettings for 50 projects is made using data supplied by a building contractor. The study is made the data in sized sets in the chronological order that they became available to the contractor. Bids yielded by the sized data-sets in each model are compared to the low and second low actual bids and evaluated in terms of the anticipated profit and dollar volume of work which they would yield. These results are used to define the range in which the low bid in an actual letting will most likely fall wherein the lower bound is yielded by one competitive strategy model with a particular sized data set and the upper bound by another with another sized data set. The contractor uses his practical experience to select a value in this range as his bid. The ranges for projects 51 through 54 bid by the contractor are obtained, the bids selected and compared with the actual lettings. Conclusions on the bidding procedure resulting from this application are presented.

Bidding Contingencies and Probabilities

Abstract: Bidding contingencies are categorized into the following four groups: Mistakes; subjective uncertainties; objective uncertainties; and chance variations. In each case a formulation is developed to quantify the dollar value of the contingent event. Also treated under this heading is the problem of optimizing levels of performance (expense) as it applied to substitutions. Objective uncertainties are formulated in terms of the optimum height of a cofferdam as a function of the probability of flooding. Chance variation is treated in three ways. First, in terms of breaking even and the break-even chart. Then, productivity is considered as a triangular distribution. And finally profit is formulated in terms of the confidence level (standard deviation). The single most important thesis is that project should be bid on the basis of breaking even rather than on the basis of an arbitrary allowance for profit. If the former condition is satisfied, the latter is practically certain.

The Statistical Structure of Bidding for Oil and Mineral Rights

Abstract: Analysis of lease auctions shows that bids on a given tract tend to be lognormally distributed. Also, the ratio of the winning bid to the product of the average bid and the square root of the number of bidders on a tract is essentially a lognormal variate; the logarithm of the ratio has expected value zero and variance 0.078. This surprising result follows from an observed consistency in the standard deviation of the underlying lognormal distribution of bids. A graphic device for rapidly evaluating the efficacy and efficiency of an observed bidding policy is described.

Note—An Addendum to “A Model of Rational Competitive Bidding”

Abstract: This note bridges a logical gap created by an unstated assumption in a proof in the referred-to paper.

On the Regulation of Industry: Rejoinder

Abstract: The central issue in this debate is to demonstrate how competitive bidding can lead to marginal cost pricing when the technology is such that only one producer can efficiently serve the market. In the spatial model described in my note, there is decreasing average cost which approaches a constant asymptotically. This constant is the marginal cost. Unit transport costs are constant with respect to distance and quantity. There is an identical demand schedule at every point on a straight road of finite length such that the rate of purchase varies inversely with the delivered price. However, the level of demand at each point on the road is too small to support a plant. Hence there is a finite number of plants equally spaced along the road. Assuming free entry, I show that this situation leads to monopolistic competition as described by Chamberlin. If all firms collude we obtain monopoly. In neither case is there marginal cost pricing of a kind that maximizes consumer welfare, assuming that this is measured by the net consumer surplus. Even if the demand is large enough to support one plant at every point on the road, it is still true that free entry would not maximize consumer welfare. Moreover, in this case all of the buyers would have to combine and deal collectively with actual or potential sellers in order to ensure a number of plants and an output per plant that would maximize net consumer surplus. Whether such a consumer collective should be described as an actor in a competitive bidding process is a matter of taste. A more accurate terminology seems preferable to me. The combination of the fixed cost and the constant marginal cost gives my model the flavor of a public good. Demsetz now agrees that his solution, the rate of oUtpUt Q2 in his figure 1, falls between the monopoly output, Q1, and the socially optimal output, Q3, according to the criterion of maximum net consumer surplus. The distance among the three, points depends on the shapes of the schedules. I see no reason to embrace Q2, which Demsetz pronounces as his original contribution, merely because according to some vaguely described bidding process it yields no profit to the winning supplier. Marginal cost pricing is emphasized by most economists who study this subject, and in footnote 6 of his first article Demsetz informs us he will not discuss this. His present reply showing

Device and method for bridge instruction

Abstract: This disclosure described an instructional device and method for teaching the proper bidding and opening leads in the game of bridge. The device includes a set of four bidding charts, e.g., on separate cards, one for each player. Each bidding chart includes an identification of the playing cards of the bridge hand for the particular player and an identification of the seating position for that player, i.e., north, east, south or west. Each chart also includes a bidding sequence showing the correct sequence of bids for the next preceding bidder. One of the charts, that of a player other than the opening leader, will indicate the correct opening lead against the correct final contract.

Cooperative and competitive price bidding in a duopoly game

Abstract: Nine dyads played 20 trials of a duopoly price bidding game. On each trial Ss submitted bids and received information about their own profits and the other's bid. Both Ss had identical cost and revenue functions and the payoff relation between dyad members was symmetrical. Over 60 percent of the price bids in the game were at or below the zero profit point and only 12 percent of the bids were at the cooperative maximally profitable price. Structurally and empirically the game had characteristics similar to the mixed motive Prisoner's Dilemma. Although Ss followed a strategy recommended by economic theory, the dilemma characteristics forced Ss to carry the strategy into the bid region below the lower limit suggested by economic considerations. Directions of bid shifts were strongly influenced by relative position (high or low bidder) on the previous trial and by both the player's own previous bid and the other's previous bid. Bids tended to shift gradually to the next higher or lower bid or were maintained and responses to other's previous bid showed a similar pattern. Ss in dyads who won more or lost less money than their partners chose lower bids and responded differently to bids than did the other dyad member. Bidding was used as a signalling channel to the other subject to overcome the lack of overt communication between dyad members.

A decision system for competitive bidding

Abstract: Describes a model for adapting successful bidding strategies, placing it in the context of a company's overall structure and competitive strategy. Lists the benefits of the decision system approach, revealing it to be a useful tool in a management information and control system.

Competitive Bidding On Foreign Work

Abstract: The increased opportunity for overseas work has found American engineers dealing with foreign clients whose practices are governed by rules and laws at variance with the U.S. Code of Ethics. In recognition of these conditions ASCE adopted in 1963 a Codicil to the Code of Ethics which has come to be known as the When in Rome clause to enable ASCE members to obtain work outside the Untied States. The United Nations Development Program uses price bidding; other international agencies such as AID, World Bank, and Inter-American Bank generally subscribed to non-price competition methods of engineer selection. In general, the present climate regarding competitive bidding seems to be improving, which raises the question of the relevancy of the ASCE Codicil on competitive bidding to present day conditions. It is recommended that the language of the Codicil be reexamined, but that the intent remains unchallenged until all international agencies follow a consistent practice and remove price information from proposal requests.