Showing papers on "Bidding published in 1973"

The determinants of choice of supplier: a study of purchase behaviour for capital goods

Abstract: Examines the field of capital goods purchases, dealing specifically with four types of standard machine tools sold into the UK market. Identifies key factors in the supplied quotation judged by the buyer to be instrumental in discriminating between successful and unsuccessful quotations. Reveals that these were taken from survey date collected by personal interview in 51 companies. Suggests that this will aid machine tool suppliers in securing orders from customers as well as providing a predictor of their prospects in any competitive bidding situation.

Managerial Judgement in a Competitive Bidding Model

Abstract: The basic Friedman model is extended to allow for bias in cost estimates and the use of management judgement on market trends. The estimated mean bid is used as a parameter. Simulation, using data from four construction companies, is used to evaluate the performance of the resulting model. A sensitivity analysis is used to determine the required accuracy for the management estimate. A brief account is given of the introduction of the model as a practical tool of top management in a major construction firm.

The Effect of Market Organization on Competitive Equilibrium: the Multi-unit Case

Abstract: A few years ago V. L. Smith reported a series of experiments concerning the effects of market organization on competitive equilibrium [4]. Three market organizations were explored in those experiments: (1) sellers making price offers; buyers free to accept offers, but not permitted to make price bids, (2) buyers making price offers; sellers free to accept offers, but not permitted to make price bids, and (3) both sellers and buyers making price bids and free to accept offers. These market organizations were investigated under the condition that each buyer and each seller could trade at most one unit in any market period. This paper reports experiments designed to extend Smith's work to the case in which traders may trade multiple units of the commodity in any market period. Because market organization (3) would present some procedural difficulties in the multiple unit case, only organizations (1) and (2) were investigated in my experiments. These two organizations capture the essential structure of some familiar markets. For example, as Smith notes [4, p. 182], the exchange process in most United States retail markets has traditionally been sellers offering merchandise at stated prices and buyers responding by purchasing the quantities desired, with no price bargaining. Reversing the price leadership roleallowing buyers to state price offers and sellers to respond with quantities-reflects the structure of markets such as the crude oil market and some food markets (e.g., food processors purchasing from growers). Also it appears that the behaviour of markets under organizations (1) and (2) places rough bounds on the behaviour of markets under organization (3),3 so I probably have not lost too much information by considering only organizations (1) and (2). One additional aspect of market organization differentiates my experiments from Smith's. In his experiments the bidding process continued throughout the market period, enabling the price bidders to alter their offers during a trading period. In my experiments price offers were posted at the beginning of each period and could not be changed for the duration of that period. This condition is a bit artificial since price bidders in real markets can alter their price bids at any time, not merely at the beginning of some specific trading period. Obviously, though, there is some short period between price changes, and it is this characteristic that I hoped to capture.

Utility Function Determination for Bidding Models

Abstract: Two basic decision criteria which may be used in bidding models are maximization of expected monetary value and maximization of expected utility value. The utility function is used in the latter type of models so that the contractor’s personal goals and risk preferences may be reflected in the suggested markup levels. The utility function is determined by presenting the contractor with a number of hypothetical bidding opportunities within the framework of the von Neuman-Morgenstern utility axiom system. The utility function results obtained in the illustrative example indicate that the contractor tended to be risk averse when considering all markup levels on large size projects and favorable markup levels on small size projects. He tended to gamble when confronted with small or large markup levels on small size projects.

Profit Analyses and Sequential Bid Pricing Models

Abstract: A bid pricing strategy based upon opportunity costs is presented for the firm confronted with the problem of competitively pricing a sequence of sealed tenders for future undifferentiated but interrelated contract work. Each contract, if awarded, will require the expending of predetermined amounts of several restricted resources at a later time. A goal of the bidding strategy is to determine a price structure of the winning bids which maximizes the total contribution over direct costs associated with the time period of resource utilization. According to various levels of complexity of data, several models of the problem are developed together with optimal bid price rules. Each optimal rule involves scarce resource “cost” charges for future opportunities and competitive advantages according to the general bid rule form: OPTIMAL BID PRICE = DIRECT COSTS + OPPORTUNITY COSTS + COMPETITIVE ADVANTAGE FEE. Experiences are also given of an adaptive and conditional implementation of the general bid rule for a major chemical manufacturer in a complex business area where sales orders are determined by competitive bidding.

Closed competitive bidding

Abstract: This paper replaces the competitive bidding models of Friedman and Gates with a more general probabalistic bidding model which resolves the conflict between them The validity of the model is demonstrated by simulation Practical difficulties of using the probabalistic approach are discussed and several lines of future research suggested

Market problems in the distribution of emission rights

Abstract: An auction-type bidding process is analyzed. A public authority distributes permits providing the right to discharge specified waste loads into a medium. Potential purchasers of the permits may perceive themselves as having some measure of control over the permit prices through their bids. It is shown that, given sufficient information on the nature of bidding strategies, the authority can infer the firms' marginal treatment cost functions from their bidding behavior and may therefore be in a position to impose the optimal solution of discharges.

A Planning Model for a Water Quality Management Agency

Abstract: The Canada Water Act provides for the establishment of regional management agencies in areas designated as water quality management areas. These agencies must establish water quality standards within their area and design a control program to meet these standards efficiently. This paper describes a model for planning an efficient water quality program within a river basin. The waste abatement control employed is called the rent allotment control, whose merit is that its implementation provides a solution to the information problem of efficient waste abatement. The control is implemented through a bargaining process or game between the agency and the waste dischargers that may be characterized as an n-person prisoner's dilemma. The game provides the agency with information about individual waste abatement costs, and terminates in a set of agreements on rents and allotments which depend upon the bidding strategies adopted by each player. “Optimal” bidding strategies are examined under the assumption that wa...

Bidding Is Against Client Interest

Abstract: Selecting an engineer or an architect on the basis of the lowest price can easily result in construction that is initially more costly, and more expensive to maintain, since it tends to discourage imaginative planning and design as well as alternate solutions. Some numbers quickly show the pennywise and pound foolish economics of competitive bidding from the owner's point of view. Assuming a savings of even as much as 25% of the design fee (normally between 5 and 10% of project cost), this saving in total project cost of 1-1/4 to 2-1/2% can be lost many times over through inadequate or incomplete planning and design. The professional engineer or architect must be free and eager, within the limitations of a soundly established, mutually accepted budget, to find the most efficient design for the client.