Recurrent Competitive Bidding

Abstract

A competitive bidding policy can be formulated if prior probability distributions of competitors' bids for future contracts have been determined. A method for determining these prior probability distributions is described for markets where there are a large number of customers. The identity of each winning company and its bid are assumed to be available to competitors and other customers so that the market reacts quickly to changes. A real example of the use of the method is given. The suppliers' general levels of bidding and their variation with individual types of customer are evaluated quantitatively. The results are consistent with qualitative knowledge of the market.