First price sealed-bid auction of the grey game improvement model via double-parameter Bayesian estimation

Abstract

PurposeThe improved classical model makes it possible that the evaluation strategy has an optimal tendency, which reveals the purpose of this paper is to facilitate the first price sealed-bid auction more in line with the actual situation. To be more specific, there are several merits in the improvement process. On the one hand, the bid-winning probability can be improved for the bidder; on the other hand, the real market value of the subject matter can be more clearly recognized for the employer.Design/methodology/approachBayesian estimation and grey system theory are referenced in this paper, with the use of double-parameter estimation, little historical data and expert experience. Specific implementation steps are as follows: first of all, using the double-parameter Bayesian estimation to correct the actual valuation of the bid matter v, then introducing the threat factor grey number R in the auction model, giving the improving of the optimal grey quotation and grey expectation utility under the two-party game and finally taking the aerospace component procurement as an example, simulating the bidding process of the bidding parties to arrive at the optimal bid strategy.FindingsThe improved model shows that the optimal strategy will change with the threat factor rather than a fixed value. When the threat factor grey number R follows [0.4, 0.6], the optimal quotation strategy will appear, which means quotation is higher than 50% of the bid matter's valuation.Practical implicationsThe improved model proposed in this paper can strengthen the cost control in the Chinese commercial space process and optimize the pricing strategy for the final launch.Originality/valueThe modified model changes the habit that the bidder's valuation of the bid subject to mainly come from experience and to prompt the model for making full use of little historical data on the foundation of the former. It can reduce the subjective judgment error in the game results; finally, the practical cases are simulated in MATLAB at the same time, and the simulation effect is good, so we can get some more realistic conclusions on this basis.