A buyer–seller game model for selection and negotiation of purchasing bids

Abstract

Selection and negotiation of purchasing bids is a complex decision making process that requires consideration of a variety of vendor attributes such as price, delivery performance, and quality. Although several decision models have been utilized for vendor evaluation and selection, this paper proposes a buyer–seller game model that has distinct advantages over existing methods for bid selection and negotiation. The model effectively evaluates alternative bids based on the ideal targets set by the buyer. The alternative bid ratings are then utilized in an integer programming model in selecting an optimal set of bids that satisfy the buyer's demand requirements. The model also assists in proposing effective negotiation strategies for unselected bids in order to make them competitive. Finally, the paper proposes four variations of the model for evaluating different bid scenarios thereby providing flexibility for the buyer in selecting the appropriate method. The model application is demonstrated through a previously published dataset from a pharmaceutical company.