Abstract
Corporate investment decision about engineering projects is a key issue for project management. This article aims to study the process of bidding decision-making in engineering field under the condition of incomplete information and investigating the influence of bidders’ game behaviors on investment decision. With reasonable assumed scenes, this article uses an approach to describe the decision process for bidding. The approach is based on the static game theory. With the proposed model, the effectiveness of game participants and the objective function are put forward, and the characteristics of price quotation and the best strategies of bidders under the equilibrium condition are discussed. The results can give a better understanding of investment decision in engineering management and are helpful for tenderees to avoid excessive competition among bidders.
Highlights
Engineering projects have generally the characteristics of large investing amount, high risk, and irreversible investment
The more bidders participate in the competition for the bid project, the more conducive the situation is to the tenderee, and the less benefit the bidder can get
Rational bidders have the willingness that lowering quoted price enhances the probability to win the bidding
Summary
Engineering projects have generally the characteristics of large investing amount, high risk, and irreversible investment. In order to simplify the process and highlight the key point of bidders’ game behavior, based on the characteristics of bidding, this article supposes in the quotation game: first, each bidder makes quotation decision in advance individually. In order to simplify the analysis further, three assumptions are put forward: first, the transaction cost generated in the bidding game is neglected; second, tender offer is unreserved, namely the tenderee will not set a minimum winning price beforehand; third, the rule is that the lowest quote will win the bidding, namely, after proving qualification of all bidders, the bidder with lowest bidding quotation will be recommend to win the bidding, which is in accordance with the purpose of tenderee pursuing the lowest project cost and procurement cost. Since (C1(R1) 2 b)/(ai) 61⁄4 1, we can get the maximum through the first order of formula (10)
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