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Predicting the probability of winning sealed bid auctions: a comparison of models

Skitmore, Martin (2002) Predicting the probability of winning sealed bid auctions: a comparison of models. Journal of the Operational Research Society, 53(1), pp. 47-56.

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Abstract

This paper is concerned with predicting the probability of tendering the lowest bid in sealed bid auctions. Four of the leading models from the bidding literature are shown to be subsumed within a general model – differing only in their method of parameter estimation. These models are then tested relative to the equal probability model by an empirical analysis of a large sample of real construction contract bidding data via all-in, one-out and one-on sample frames. A binomial test is used to measure the ability to predict the identity of the lowest bidders and the average logscore is used to measure the ability to predict the probability of each bidder being the lowest. Optimal cut-off criterion values are determined for defining the minimum size of dataset needed for disaggregating bidders. The work also highlights the importance of (1) the treatment of new entrants and general shortage of data on individual bidders, and (2) the treatment of predicted ties.

Impact and interest:

7 citations in Scopus
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1 citations in Web of Science®

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337 since deposited on 16 May 2006
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ID Code: 4141
Item Type: Journal Article
Keywords: Bidding models, bidding theory, construction contracts, empirical tests, predicted probability, probability of lowest bid, sealed bid auctions, tendering theory, binomial test, logscore test
DOI: 10.1057/palgrave/jors/2601236
ISSN: 1476-9360
Subjects: Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > BUILDING (120200) > Quantity Surveying (120203)
Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > BUILDING (120200) > Building Construction Management and Project Planning (120201)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Copyright Owner: Copyright 2002 Palgrave Macmillan
Copyright Statement: This is a post-peer-review, pre-copyedit version of an article published in Journal of the Operational Research Society . The definitive publisher-authenticated version Skitmore, Martin (2002) Predicting the probability of winning sealed bid auctions: a comparison of models. Journal of the Operational Research Society 53(1):pp. 47-56 is available online at: http://www.palgrave-journals.com/jors/index.html
Deposited On: 16 May 2006
Last Modified: 09 Jun 2010 22:32

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