Dissertation > Social Sciences > Management > Decision Sciences

The Study of Bidding Decision-making Based on Bayes

Author DongBingBing
Tutor ChaJingMin
School Tianjin University
Course Project Management
Keywords Bidding Price Bayesian Decision Bidding Strategy
CLC C934
Type Master's thesis
Year 2012
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With the bidding system introduced into China and its rapid development, studyon bidding decision-making becomes increasingly important. Although the researcheson bidding decisions at home and abroad have been very in-depth, each theoreticalmodel has its disadvantages and scope of application. In the actual bidding decision, itis difficult to obtain numerous data needed for models due to time constraints andasymmetric information. At the same time, bidding decision-making is influenced bycomplicated factors such as human characteristics. All of these are difficult to besimulated by mathematical models. At the same time, similar bidding cases in historyand the experience of bidders are valuable. But how to make use of historical casesand the experience of bidders is remaining to be studied. As the reasons above, wepropose that applying Bayesian decision-making theory to bidding decision-makingsystem, to be more exact, applying Bayesian decision-making theory to biddingprice-making process. The bidder firstly estimate the base numbers of a tender and thedistribution of probabilities of them from macroscopic view, corporate view, projectview and tender view, which is called prior analysis. Then they select similar cases inhistory which is called prediction posterior analysis to modify the probabilities to getthe posterior analysis result which combines the prior analysis and information fromhistorical cases and is more practical. In the process of prediction posterior analysis,new information costs. Therefore, before we obtion new information, we shouldestimate whether the value of new information could overweigh its cost. Only whenthe value of new information overweighs its cost could we obtion it. We should alsoanalyse whether it is profitable to obtion new information by marking it using therules in bid documents. Only when the marks are inproved after obtaining newinformation does it profitable to obtain them.Based on the analysis above, we could get the conclusion that if we apply theBayesian decision-making theory right, the probability of winning the bidding will beinproved. Bidders should try to obtain the information of the project totally andhistorical cases and evaluate the bid after bidding as they are very important.

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