Participating in an auction and winning items by placing bids has been in practice since at least 500 B.C. Auctions have evolved since then and anyone can now participate in one online and buy items ranging from clothes, electronics, automobiles and homes using online auction websites, such as eBay. A Reverse Auction varies from the traditional style of Auction where items or services are won by placing successive higher bids until the auction ends. The study of Reverse Auction was first introduced to Texas A & M University in 2004 and continues today, using a SQL based web system. This current research provides a detailed statistical analysis of the fourth case study in this long running work. This fourth case study involved the participation of five bidders who had no prior experience in Reverse Auctions. A Microsoft Access database system and ASP web based user interface was developed and used to conduct these initial studies. However, due to the limited capability of the Access system to handle more than a limited number of connections or bidders, a Microsoft SQL database and web system was developed in 2006 and has been used in all subsequent studies. Case studies have involved up to ten participants. The results from the fourth case study show that a Reverse Auction can result in an increase in the average cost of the job to the owner. Also, there is evidence of game play amongst the bidders and against the purchaser that causes their profits to rise as they gain proficiency in the game. This behavior has been termed as 'tacit collision', but it is considered a byproduct of the system and not illegal behavior. This study analyzes the fourth study data to investigate if the behavior termed "tacit collusion" is evident in the bidding data. This analysis is completed by performing a detailed statistical analysis of the bidding data. Analysis of the profit percentages illustrates the different stages of the game play amongst the bidders. This game play behavior is illustrated by plotting average number of bids to the profit made by each bidder. The data clearly suggests that the players became efficient in their bidding strategy, although some bidders are more efficient than others. This observation negates the common conception that Reverse Auctions will result in lowering average costs for the owners. The individual data of bidders for bids and profit reveal why some players were able to obtain higher than average results and why the others were not. This study can be taken further by analyzing the patterns of the successful and unsuccessful players to determine what causes them to gain or lose profits.

Competitive bidding, where the project is awarded to the lowest bidder, is a basic part of the construction industry. This method of project delivery is designed to promote healthy competition in an attempt ensure the lowest price for the project. A contractor knows that lowering a bid price increases his probability of being awarded the project. However, without a clear understanding of the market in which he is competing, he can not know how low he should bid in order to win. One of the most important competitive forces in a competitive bidding market is the how low the contractors are willing bid, i.e., how aggressively they are pursuing the project. Contractors need a simple way to examine the level of aggressiveness in their market. The purpose of this research is to develop a methodology to enable contractors to better understand this level of aggressiveness. The level of aggressiveness is quantified by the ratio of the low bid to the pack price, where the pack price is defined as the lower of the two bids that are closest together. The examination of two competitive bidding markets--the Virginia Department of Transportation market between 1996 and 1998 and the Tennessee Department of Transportation market from 1996 to 1998--tests the validity of the methodology. The methodology for estimating the level of aggressiveness in a competitive bidding market produces a set of success curves and charts, which can be used by contractors to optimize their competitive bid amounts for future projects. / Master of Science

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El presente trabajo de investigación tiene como objetivo principal la identificación de factores, malas prácticas o procedimientos que influyen en la diferencia en costo entre los presupuestos de licitación vs el presupuesto con el que se cierra un proyecto de la Gran Empresa Constructora en el sector público, y el planteamiento de mejoras para la reducción y/o eliminación de los sobrecostos en sus obras licitadas; para lo cual se tomaron como caso de estudio dos proyectos importantes que se encuentra dentro de la cartera de proyectos de La Empresa, los cuales son: “Infraestructura Deportiva” e “Infraestructura Bancaria”. Del análisis de los proyectos se identificaron cuatro factores como errores o falencias cometidas durante la etapa de licitación: la falta de experiencia o capacitación del personal que participa en las licitaciones, el tiempo reducido para el estudio y preparación de las propuestas, la falta de documentación o mala revisión de la información para el desarrollo de la propuesta y deficiencia en el proceso de licitación o falta de eficiencia en la elaboración de propuestas. En base a los factores identificados, las propuestas de mejora desarrolladas en base a los problemas identificados, son el dimensionamiento y selección del equipo idóneo de trabajo en base a ratios de tiempo efectivo, mejorar la gestión de la información realizando reuniones de transmisión de información durante el proceso de elaboración de la propuesta, la retroalimentación de parte del equipo de ejecución de proyecto hacia el equipo de licitaciones y el manejo de una base de datos de precios unitarios. / The present investigation has as main goal the identification of poor practices, factors and procedures that influence in the difference in costs between the bidding and final closing budgets in Large Construction Company in the public sector, and the presentation of improvements to reduce or eliminate overcosts on its bidding projects; for that, there were taken as cases of study two main projects that are included in The Company project portfolio which are: “Infraestructura Deportiva” and “Infraestructura Bancaria” There were identified four factors or common errors, from the project analysis, that were made during the bidding process: lack of experience or training from the professionals that participate in the bidding process, limited time to prepare proposals, lack of information provided from the client or its poor review to develop the proposal correctly and bidding process deficiencies or inefficiency at preparing the proposal. Based on the factors identified, the improvement proposals based on the problems mentioned are: dimension and selection of the ideal work team based on effective working time ratios, enhance information management by scheduling transfer reunions during the bidding process, give feedback from the execution team to the bidding group and manage a Unit Price database. / Trabajo de investigación

The outcome of this research has been to gain insight into the processes of bidding for New Zealand hosted sports events with a particular focus on understanding the factors that make a successful bid. It investigated the perceptions of the two parties associated with an event bid: the event bidders and the event owners. The research has also compared and contrasted the international findings with the New Zealand findings and a model of the event bidding process (Targeted Model), from the perspective of the local government event bidder, has been developed.Of the international research that had been done on event bidding the majority had been focused towards identifying the success factors when bidding for high-profile mega-events such as the Olympic Games. At the local level, the literature review identified that no such research had been conducted on event bidding within New Zealand. This lack of research presented the opportunity to gain an insight into the event bidding process within New Zealand. Due to the competitive nature of event bidding, New Zealand event bidders tend to work in isolation and there is no collective understanding of those factors that secure a bid. This research has overcome this isolation and presented a collective understanding of the success factors.Using the grounded theory methodology, common success factors and a model of the event bidding process emerged from the data. Common success factors that were frequently mentioned by event owners and event bidders included the need for government support, providing adequate event infrastructure, previous event management experience and providing quality information. The event owners tended to focus on those factors that ensured the successful delivery of the event. In addition, the event bidders mentioned common success factors that enhanced the bid: previous bidding experience; partnerships and relationships; bid leadership; research; providing quality information; using figureheads; making an emotional connection with the decision makers.The Targeted Model identifies the critical stages in the bidding process from the perspective of the New Zealand local government event bidder. An important step in event bidding is the "Bid Development Stage" where the event bidders are attempting to fulfil, and in most cases, exceed the criteria presented by the event owners. Event bidders who achieve the state of "Best Fit" - the desired outcome of the bid process where the event owners' conscious needs and unconscious desires are best met by an event bid - will succeed in winning the bid.The significance of this research is that it is the first of its kind in New Zealand, from which further research on event bidding will be able to compare and evolve from. One of the outcomes of the grounded theory methodology is that the findings are useful for the participants. It is envisaged that the results from this research will have practical applications for the events industry as it provides useful insights to the factors that win a bid and clearly models the bidding process.

One of the most important considerations in winning a competitive bid is the determination of an optimum strategy developed by predicting the competitor's most probable actions. There may be some common factors for different contractors in establishing their bid prices, such as references for cost estimating, construction materials, site conditions, or labor prices. Those dependencies from past bids can be used to improve the strategy to predict future bids. By identifying the interrelationships between bidders with statistical correlations, this study provides an overview of how correlations among bidders influence the bidders winning probability. With data available for over 7,000 Michigan Department of Transportation highway projects that can be used to calculate correlations between the different contractors, a Monte Carlo simulation is used to generate correlated random variables and the probability of winning from the results of the simulation. The primary focus of this paper outlines the use of conditional probability for predicting the probability of winning to establish a contractor's strategy for remaining bids with their estimated bid price and known information about competitors from past data. If a contractor estimated his/her bid price to be lower than his/her average bid, a higher probability of winning would be achieved with competitors who have a low correlation with the contractor. Conversely, the lower probability of winning decreases as the contractor bid with highly correlated contractors when their bid price is estimated to be higher than the average bid.

In this dissertation I study bidding behavior in Internet Auction Markets. I focus on practice called "multiple bidding" which occurs when a single bidder places numerous bids throughout the same auction. Multiple bidding appears frequently in the data but the incentives that motivate it are not well understood. In the first chapter I develop a theoretical model in which multiple bidding is an equilibrium behavior by rational bidders. The model has a dynamic auction with two bidders who can search for outside prices while bidding in the auction. Each bidder has a search cost which is her private information. When outside prices are private (independently drawn and identically distributed), then, there is an equilibrium in which bidders with the lower search costs bid only late and always search, while the bidders with higher search costs bid both early and late and search as if they coordinated their search decisions, i.e., the bidder with the lower search cost searches and the other bidder does not. This equilibrium by itself provides an explanation of two frequently occurring bidding patterns (late and multiple bidding). In the second chapter I study experimentally the effect of early bids in dynamic auctions on how bidders search for outside prices. The design has two bidders participating in an ascending clock-auction during which any one of the bidders can pause the auction clock. This I interpret as placing an early bid. Once the auction is paused both bidders can simultaneously search for an alternative outside price. Results indicate that pausing decisions by subjects impact their subsequent searching for outside prices, i.e., whether a subject decides to search or not depends on whether she has paused the auction or not. Subjects behave as if they coordinated their searching decisions: the bidder who pauses the auction also searches with high frequency and the other bidder does not. Because this type of behavior increases both the efficiency and the profitability of the auction we favor the use of policies that promote early bidding in practice, such as, longer auctions and lower public reserve prices.

The outcome of this research has been to gain insight into the processes of bidding for New Zealand hosted sports events with a particular focus on understanding the factors that make a successful bid. It investigated the perceptions of the two parties associated with an event bid: the event bidders and the event owners. The research has also compared and contrasted the international findings with the New Zealand findings and a model of the event bidding process (Targeted Model), from the perspective of the local government event bidder, has been developed.Of the international research that had been done on event bidding the majority had been focused towards identifying the success factors when bidding for high-profile mega-events such as the Olympic Games. At the local level, the literature review identified that no such research had been conducted on event bidding within New Zealand. This lack of research presented the opportunity to gain an insight into the event bidding process within New Zealand. Due to the competitive nature of event bidding, New Zealand event bidders tend to work in isolation and there is no collective understanding of those factors that secure a bid. This research has overcome this isolation and presented a collective understanding of the success factors.Using the grounded theory methodology, common success factors and a model of the event bidding process emerged from the data. Common success factors that were frequently mentioned by event owners and event bidders included the need for government support, providing adequate event infrastructure, previous event management experience and providing quality information. The event owners tended to focus on those factors that ensured the successful delivery of the event. In addition, the event bidders mentioned common success factors that enhanced the bid: previous bidding experience; partnerships and relationships; bid leadership; research; providing quality information; using figureheads; making an emotional connection with the decision makers.The Targeted Model identifies the critical stages in the bidding process from the perspective of the New Zealand local government event bidder. An important step in event bidding is the "Bid Development Stage" where the event bidders are attempting to fulfil, and in most cases, exceed the criteria presented by the event owners. Event bidders who achieve the state of "Best Fit" - the desired outcome of the bid process where the event owners' conscious needs and unconscious desires are best met by an event bid - will succeed in winning the bid.The significance of this research is that it is the first of its kind in New Zealand, from which further research on event bidding will be able to compare and evolve from. One of the outcomes of the grounded theory methodology is that the findings are useful for the participants. It is envisaged that the results from this research will have practical applications for the events industry as it provides useful insights to the factors that win a bid and clearly models the bidding process.

In the construction industry, the winner’s curse occurs when the winning contractor has underestimated the project’s true cost. Using a game and auction theory approach, this study aims to analyze - and potentially reduce - industry exposure to the effects of the winner's curse in construction bidding. A simulation model for single and multi-stage bidding processes was developed and analyzed an actual dataset of California Department of Transportation projects. The majority of general contractors and sub-contractors suffer from the winner's curse in both single and multi-stage bidding environments. The multi-stage bidding environment incurs more losses than the single-stage bidding environment. Through learning from past experiences though, the multi-stage bidding environment provides contractors with better opportunity to avoid the winner's curse. Finally, it was shown that the symmetric risk neutral Nash equilibrium optimal bid function provides the contractors with a tool to avoid the winner's curse and gain strategic positive profits.

The advancement of computer technology is playing an important role in almost all fields in the construction industry in the current era. It has become a tool for exchanging legal contract information, including bid data. In the traditional closed bidding system, the bidders were unaware of their competitors' bid quotes and had no opportunity available to make a counter an offer to the bid at a different level. However, in reverse auction bidding (RAB), contractors can track their competitors' bids and take the given opportunity to re-bid the projects at lower rates. Unlike traditional auctions, where buyers raise their purchasing prices to outbid competitors, reverse auctions permit buyers to purchase goods and services from suppliers who are encouraged to sell them at the lowest price. The benefit of the reverse auction bidding is either that the vendors are able to re-bid, or lower their bid multiple times. This is an example of transparent economic information. Van Vleet initiated the ongoing Reverse Auction Bidding study at Texas A&M University. Van Vleet had created a Microsoft Access database system and ASP web based user interface for RAB study. The methodology developed by van Vleet is still being used today, and this study has been extended into analyzing different personality types and the impact on the bidding system. In the previous studies conducted by different researchers in TAMU, the performance of participants in the RAB process along with their behavior are being observed with respect to their personality. Personality of each player is tested using the Keirsey Temperament Sorter (KTS) test. The previous study states that there appears to be a strong correlation between personality type and game performance. The first case study conducted by van Vleet involved five participants who had no prior experience in Reverse Auction Bidding. The number of participants has varied from three to ten participants. This research has been conducted on graduate students of the Construction Science Department of TAMU who have no prior experience in RAB. In continuation with the previous studies held in TAMU, the results show that there is an observable pattern in the bidding strategy of first time bidders while taking part in Reverse Auction Bidding.