A model and procedure for competitive bidding under resource constraints

A model and procedure for competitive bidding under resource constraints

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Article ID: iaor20081555
Country: United Kingdom
Volume: 2
Issue: 4
Start Page Number: 452
End Page Number: 480
Publication Date: Jun 2007
Journal: International Journal of Operational Research
Authors: ,
Keywords: scheduling, heuristics: tabu search
Abstract:

Accurate cost estimates for an incoming order are critical in formulating the optimal bidding strategy. When a firm is approaching its resource capacity, adding a new job into the system in the short-run may cause violations of the due date requirements, thus penalty costs arise. Failure to obtain an accurate estimate of the penalty costs often leads to sub-optimal bids. In this paper, we propose a two-stage model and procedure for optimal bidding under explicit resource constraints. The computational results indicate that our model and solution approach is both effective and efficient for the proposed problem.

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