Showing papers on "Bidding published in 1974"

Is the Rent-Collector Worthy of His Full Hire?

Abstract: Allyn Young and Frank H. Knight have set straight the Marshall-Pigou fallacy that all increasing cost industries ought to be socially penalized: Young and Knight point out that the bidding up of rents to factors scarce to an industry are "transfer" costs to society; and, further, that such rents have to be charged if social efficiency is to be achieved. Otherwise land will get nonoptimally utilized; fishing seas and roads may become overcrowded. I take this all to be standard doctrine.

The Optimal Balance between Economies of Scale and Variety of Products: An Illustrative Model

Abstract: In conditions of monopolistic competition there is a number of independent producers each producing its own particular brand or quality of a class of products which, while they are not exactly identical, are nevertheless partial substitutes for each other. A well-known problem in the economics of welfare then arises which can be expressed by asking the following two questions. First, is each producer producing the optimal output of his particular brand? Second, are the best number and assortment of brands being produced, or should there be more or less variety of products to meet the consumers' needs? The answer to the first of these two questions is reasonably straightforward. Since each producer will be faced with a less than infinitely elastic demand curve for his particular brand, his selling price will be above his marginal revenue and, therefore, above his marginal cost. He must produce more if he is to equate marginal cost to selling price. This proposition is, of course, subject to all the familiar limitations of the "second best". In particular, in a world of monopolistic competition the proposition that marginal costs should be equated to selling prices will hold good only if it is applied simultaneously in all lines of production; and if it is so applied and if we start from a position of full employment, it will clearly be impossible for all producers to expand their outputs simultaneously. What will happen as every producer simultaneously attempts to expand output will be a bidding up of the prices of the variable factors so that relationships between marginal costs and prices will be altered in the various lines of production. As a result some outputs will be increased and others decreased. Equilibrium will be reached only when outputs have been so adjusted that in each line of production marginal cost equals selling price. But what about the second question? Will the number and variety of products being produced be optimal? The marginal conditions for optimality may be satisfied; but is the structure of production optimal? The answer to this question is not so straightforward or familiar.

Bidding Models — The Final Resolution of a Controversy

Abstract: There has been a controversy over the correct formula to use in computing the probability of winning a contract by competitive bidding. Friedman and Gates have put forward differing views, and Rosenshine has attempted to reconcile them. In this paper the underlying structure of the bidding situation is examined in detail and a full probability model is developed. A revised procedure for computing the probability is set out, in which use is made of Bayes theorem, and this is illustrated by a simple worked example.

Auctioning Böhm-Bawerk's horses

Abstract: Auctions are a unique allocating device of great practical importance. They present situations that cannot easily be fit into the neat taxonomy of Neoclassical Economic Analysis. For instance, textbook theory tells us that a market with one seller and many buyers is a monopolistic market structure. But what if the seller is passive as he is in the Auction? Does this situation still qualify as a monopolistic situation with all of the typical connotations that that term implies? Obviously not. In addition, our textbooks tell us that price discrimination is the result of the profit maximizing behavior of monopolies. However, we have seen that buyers in a competitive bidding process can very naturally discriminate the price of the good they are bidding for on their own. Is a single price for a homogeneous good then still evidence of a “competitive” process?

Optimal bidding in sequential auctions

Abstract: When a bidder's strategy in one auction will affect his competitor's behavior in subsequent auctions, bidding in a sequence of auctions can be modeled fruitfully as a multistage control process in which the control is the bidder's strategy while the state characterizes the competitors' behavior. This paper presents such a model in which the state transition represents the competitors' reaction to the bidder's strategy. Dynamic programming is used to derive the infinite horizon optimal bidding strategy. It is shown that in steady state this optimal strategy generalizes a previous result for equilibrium bidding strategy in "one-shot" auctions.

Competitive bidding — The probability of winning

Abstract: A company bidding by sealed tender needs to know the relationship between their bid price and their chances of winning the contract. Previously published models for computing the probability of winning are examined and found to be inaccurate. The problem is reformulated, and a new general predictive model for computing the probability of winning is developed. The method of computation is illustrated by a simple worked example.

Some Interpretations of Sequential Bid Pricing Strategies

Abstract: This note provides an alternative interpretation for sequential bid pricing strategies as initially formulated by Kortanek, Soden, and Sodaro [Kortanek, K. O., J. V. Soden, D. Sodabo. 1973. Profit analysis and sequential bid pricing models. Management Sci. 20 (3, November) 396–417.]. In particular, bid prices obtained from the sequential model are shown to result from a condition which incorporates the failure rate function as a means of including probable actions of competing firms. A reformulation of the bidder's criterion function in the context of utility theory is also discussed and shown to result in bidding strategies which may also be interpreted in the proposed fashion.

Technical Note-A Note on Cost Estimation and the Optimal Bidding Strategy

Abstract: This note determines the optimal bid price for a firm bidding against several other firms for a contract, when each firm knows the expected value of its own cost and a probability distribution of the other firms' cost. The optimal bid price is calculated as a function of the firm's own expected cost, first for the case of two identical firms and then for several firms.

Benefits of abating aesthetic environmental damage from the Four Corners power plant, Fruitland, New Mexico

Abstract: This bulletin presents monetary estimates of the benefits from abating the aesthetic environmental damage associated with the electric power generation industry, as perceived by users of the affected environment. Before the estimates could be made, it was necessary to develop a method for making them. The theoretical concept of aggregate bid or aggregate benefits for the provision of public good provided a basis for the analysis. The bidding-game technique of data collection was adapted for use in this study. Five bidding games were developed in an attempt to provide several estimates of the benfits from abating aesthetic damage, the unknown value. The data derived from bidding games were aggregated by statistically valid techniques, for the estimates of the aggregate benefits of abatement. Analyses were performed to determine the relationship between individual bids and both household income and household consumption of electricity. It was found that individual bids for abatement tended to be higher for households with higher incomes and for households where more electricity was consumed. 13 references, 10 tables.

A Further Comment on human resource accounting

Abstract: In a critical article in the last issue of Personnel Review the two major approaches to Human Resource Accounting (HRA) were examined and the salient criticisms arrayed. The present short comment seeks to amplify further some of these debates and to enlarge the compass of the concept. Two further approaches will be examined briefly; that of competitive bidding as a means of human valuation, and systems simulation as a means of operationalizing a conceptual framework which involves HRA.

An Investigation of Two-Person Competitive Bidding Strategies

Abstract: In a competitive economy many a firm finds itself caught in the middle of a cost-price squeeze. One approach to this problem is to reduce costs as much as possible. Another approach is to obtain the best prices for its products. This paper is concerned with the competitive aspects of bidding or pricing policies. The best course of action for a person in competition depends on what he expects his competitors to do, and vice versa?interdependent decision. The analysis and examples illustrate the importance of knowing his own and, as much as it is legally permissible, to know of his competitor's relative costs, and also his competitors' bidding or pricing policies. The analysis in this paper is centered on a two-person deterministic competitive bidding game, where in practice each person has a nonlinear incremental cost matrix.

Some approaches toward a uniform code for state and local government procurement--a condition ripe for a solution

Abstract: This article surveys the problem areas in public procurement and makes some suggestions on how to achieve reform. The problems grow out of the geometric increase in procurements by state and local governments (dollar-wise), the illogical or archaic systems often used by them, and the need for reforms and uniformity of approach in the areas of competitive bidding, bid protests, and resolution disputes between contractors and public agencies at the state and local level. Although the subject has been discussed intermittently over the years, there is no uniform state law on purchasing by state and local governments. A Uniform Procurement Code would impart standards of objectivity, impartiality, economy and efficiency to the contracting process of the states, counties and municipaltities.

Clues for Bidding Strategists

Abstract: This article examines how bidding decisions are being tackled in practice. It appears very likely that in the future, these decisions will have to be made on a sounder, more structured, quantitative basis. The article suggests a formal, yet mathematically unsophisticated way of handling the bidding problem and considers how such an approach can help the decision maker. Such an approach is a valuable addition to the experience, judgment, intuition and common sense of the bidding strategist.