Friedman’s Bidding Model: Errors and Corrections
Publication: Journal of Construction Engineering and Management
Volume 145, Issue 10
Abstract
Friedman’s classic 1956 bidding model for the case in which a contractor is bidding against an unknown number of opponents applies Friedman’s multiplicative model for the probability to win, which applies only when bidding against at least one opponent, to the case in which the number of opponents is zero, to which it does not apply. Thus, both the resulting general equations and the examples for the probability to win, as well as those for expected profit, are incorrect. Moreover, the example graphs offered are not true representations of these incorrect equations. The causes and consequences of these errors are described in detail and new equations are offered as replacements. Exact graphs of the incorrect equations as well as of their replacements are presented. Four new bidding models are developed by which a contractor can find the optimum bid price that maximizes expected profit when the number of opponents is unknown and could be zero. These include the case of an owner with a reserve price that leads to a distinct and novel bidding strategy.
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Data Availability Statement
All data generated or analyzed during the study are included in the published paper. Information about the Journal’s data-sharing policy can be found here: http://ascelibrary.org/doi/10.1061/(ASCE)CO.1943-7862.0001263.
Acknowledgments
The author recognizes and thanks the anonymous reviewers of this paper for their insightful comments.
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Published In
Journal of Construction Engineering and Management
Volume 145 • Issue 10 • October 2019
Copyright
©2019 American Society of Civil Engineers.
History
Received: Apr 25, 2018
Accepted: Feb 15, 2019
Published online: Aug 5, 2019
Published in print: Oct 1, 2019
Discussion open until: Jan 5, 2020
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