Scandinavian Working Papers in Economics
Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)
No 2011:13: Why are bids not more unbalanced?
Svante Mandell () and Johan Nyström ()
Additional contact information
Svante Mandell: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Johan Nyström: VTI, Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Abstract: Earlier theoretical models of unbalanced bidding in unit price contracts (UPC) ofter predict corner solutions, i.e. zero bids for unit prices of expected overextimated quantities. However, anecdotal evidence indicates a lack of zero bids in the actual contracts. We pursue a possible explanation for this anomaly in risk-aversion of the contractor. Using a simple model we show that a contractor with superior information may exploit this in the bidding process to increase her expectd revenue. However, in so doing she increases her risk exposure. If the contractor is risk-averse, she typically will avoid a corner solution to this risk vs. expected return trade-off.
Keywords: Unbalanced bidding; risk; modelling; unit price contraction; public procurement
12 pages, November 2, 2011
Full text files
CTS2011-13.pdf
- CTS - Centre for Transport Studies Stockholm (KTH and VTI)
- VTI
- KTH
- See also working Papers, Swedish National Road & Transport Research Institute (VTI)
- Ordering Working Papers
- Instructions for Authors
- Home page for this series
Questions (including download problems) about the papers in this series should be directed to CTS ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:ctswps:2011_013This page generated on 2024-09-13 22:14:29.