The simple economics of bid criteria

Abstract

Bid criteria are of prime importance to bidders because they are the basis for the bidders to select bid price or bid mark-up. This article presents the alternative expressions of the bid criteria of the conditional negative and positive profit ratios proposed by Seydel and Olson (1990) and Lai et al. (2002), respectively, and interprets them in the traditional demand and supply theory. It is found that there is a ‘frontier’ bid mark-up if the bidders adopt the conditional profit ratio as their sole bid criterion.