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Abstract
The authors are concerned with a bidding problem. There are two companies (P1 and P2) bidding for a highway construction project. In order to be more competitive, P1 considers buying a new gravel pit near the construction site. The basic cost of the pit is known to both companies. However, there is also an additional, hidden, cost (C) known only to P1. P2 is uncertain whether the hidden cost is C = 0 or C = x. P1 plans to bid for the job, but has to decide whether to buy the gravel pit. P2, not having a complete knowledge about C, thus not knowing the strategy choice of P1, has to decide if to bid for the job. In effect we have two payoff matrices, one for the additional cost C = 0, and the other one for C = x. If the probability of P2 bidding for the project can be estimated by propagating intelligence information through a Bayesian Belief Network, the best strategy for P1 can be readily determined. Otherwise, the solution calls for changing this game of incomplete information (players may or may not know some information about the other players, e.g., their “type," their strategies, payoffs) into a game of imperfect information (players are simply unaware of the actions chosen by other players). This is achieved by introducing an additional “Nature” node which for this problem determines with some probability “p” the additional cost C= 0 (thus, C = x with probability 1-p). The solution of this game turns out to depend on the probability “p”. For some values of p the game is solved with pure strategies, whereas for other values the game is in equilibrium when the players randomly mix their strategies.
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- Category:
- Conference activity
- Type:
- materiały konferencyjne indeksowane w Web of Science
- Title of issue:
- World Multidisciplinary Civil Engineering-Architecture-Urban Planning Symposium (WMCAUS) strony 1 - 5
- Language:
- English
- Publication year:
- 2017
- Bibliographic description:
- Grzyl B., Kembłowski M. W., Siemaszko A..: Game Theory Analysis of Bidding for a Construction Contract, W: World Multidisciplinary Civil Engineering-Architecture-Urban Planning Symposium (WMCAUS), 2017, ,.
- DOI:
- Digital Object Identifier (open in new tab) 10.1088/1757-899x/245/6/062047
- Bibliography: test
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- E. Miszewska-Urbańska, "Modern Management Challenges of Floating Housing Development," Real Estate Management and Valuation 24.1, pp. 31-40, 2016. open in new tab
- M. Apollo, E. Miszewska-Urbańska, "Analysis of the increase of construction costs in urban regeneration projects," Advances in Science and Technology Research Journal 9.28, 2015. open in new tab
- B. Grzyl, "The distribution of risk in the contract for construction works in the area of public procurement," Logistyka, vol. 3, pp. 1711-1715, 2015. open in new tab
- J. Harsanyi, "Games with Incomplete Information Played by Bayesian Players, I-III," Management Science 14 (3): 159-183 (Part I), 14 (5): 320-334 (Part II), 14 (7): 486-502 (Part III). open in new tab
- D. Fudenberg, J. Tirole, "Game Theory," MIT Press, 1991.
- J. Levin, "Dynamic Games with Incomplete Information," February 2002, http://web.stanford.edu/~jdlevin/Econ%20203/DynamicGames.pdf (accessed 02.03.2017) open in new tab
- Verified by:
- Gdańsk University of Technology
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