Improving the estimation of probability of bidder participation in procurement auctions

Abstract

Anticipating the number and identity of bidders has significant influence in many theoretical results of the auction itself and bidders' bidding behaviour. This is because when a bidder knows in advance which specific bidders are likely competitors, this knowledge gives a company a head start when setting the bid price. However, despite these competitive implications, most previous studies have focused almost entirely on forecasting the number of bidders and only a few authors have dealt with the identity dimension qualitatively. Using a case study with immediate real-life applications, this paper develops a method for estimating every potential bidder's probability of participating in a future auction as a function of the tender economic size removing the bias caused by the contract size opportunities distribution. This way, a bidder or auctioner will be able to estimate the likelihood of a specific group of key, previously identified bidders in a future tender.

Uncertainty perception in bidding for Product-Service Systems under competition

“…Kreye et al (2013) found that the existence of competition can increase uncertainty perception at the competitive bidding stage because of the possibility of losing the PSS contract to a potential competitor. In contrast the research by Ballesteros-Pérez et al (2016) suggests that uncertainty perception may decrease because knowing the identity of possible competitors may make it easier to determine their possible pricing strategy. Yet, the specific effects of the existence of competition on uncertainty perception when bidding for PSS has thus far not been determined.…”

“…Finally, the existence of competition can affect uncertainty perception on the competitive bidding stage for PSS (Ballesteros-Pérez et al 2016). Previous investigations have found contradicting insights on the potential effect of the uncertainty arising from competition.…”

“…The additional uncertainty introduced through competition may influence the decision maker's consideration regarding the desired profit margin and the price bids. The introduction of competition may cause the decision maker to evaluate the likely price bids of competitors (Ballesteros-Pérez et al 2016) and hence adjust their own expectations of achievable profit margins. Specifically we would expect increased pressures for providers who in turn reduce their profit margins and reduce first price bid (Stark and Rothkopf 1979).…”

Effect of Electronic Reverse Auctions on Competition and Abnormally Low Bids in Public Construction Procurement

“…Such analysis may help to use e-RA in a more appropriate way, since they can be more successful when there is a higher level of competition on the supply market [28]. Therefore, estimates of the number of potential bidders competing in future tenders [29] should be of particular interest to buyers.…”

On the distribution of bids for construction contract auctions

“…For economics, they provide the basis for the development of equilibrium theories (to identify optimal auction arrangements for example Klemperer 2004), while for business, they offer the potential for a sharpened competitive edge through the analysis of competitor bidding behaviour (e.g. Ballesteros-Pérez, Skitmore, Pellicer, Gutiérrez-Bahamondes 2016, Ballesteros-Pérez, Skitmore, Pellicer, Zhang 2016.…”