Optimize negotiation price in construction procurement using Bayesian Fuzzy Game Model

Abstract

The challenge of construction procurement negotiation arises partly because each negotiation side has private information on their payoff function but is uninformed of the values and strategies of the opposite side. The uncertain and limited contractor information as well as complex correlations among various factors affect contractor behaviors, making learning a supplier’s negotiation strategy and deciding the appropriate offer price difficult for contractors. Therefore, the purpose of this study was to apply the forecasting ability of a novel Bayesian Fuzzy Game Model (BFGM) in providing negotiation support and recommendations for contractors determining an appropriate current bid price. The validation analysis revealed that the contractor can foresee the supplier’s future bidding strategy to increase the success rate and profit, reduce the time spent in unnecessary negotiation, and improve negotiation efficiency in the construction material procurement process. Based upon the survey data from Taiwan and Vietnam, the preliminary validation of the model shows that both contractor and supplier can obtain the profitable agreement by applying the BFGM within a reasonable negotiation time.