The optimum markup when bidding with uncertain costs

The optimum markup when bidding with uncertain costs

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Article ID: iaor1992778
Country: Netherlands
Volume: 47
Issue: 3
Start Page Number: 348
End Page Number: 363
Publication Date: Aug 1990
Journal: European Journal of Operational Research
Authors: ,
Abstract:

The use of Friedman’s approach to bidding is examined in situations where the competitors all bid with the same markup and the same distribution of uncertainty in the cost esitmate. The optimum markup is found for different distributions of the cost estimates, for different versions of the expected profit and for different formulae for the probability of winning. It is shown that the different distributions and different methods have significant effects in some, but not all cases. The Friedman method is reliable in some instances but may be harmful in others.

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