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A model to distribute mark-up amongst quotation component item

Author

Listed:
  • David Cattell

    (University of Cape Town)

  • Paul Bowen

    (University of Cape Town)

  • Ammar Kaka

    (Heriot-Watt University)

Abstract

The outline of a proposed new unbalanced bidding model is discussed. Background is provided as regards the role of item price loading, otherwise known as unbalanced bidding. Three types of loading are described, namely those of ‘front-end loading’, ‘back-end loading’ and ‘quantity error exploitation’ (otherwise known as ‘individual rate loading’). It is proposed that one single mathematical model could embrace all three of the above types and that the aspect of risk may be addressed partially by means of using the quadratic programming techniques employed within the field of Modern Portfolio Theory. MPT is a field pioneered by Markowitz in 1959 and was developed to identify optimum portfolios of investments, typically equities. It is hypothesized that MPT presents a basis by which to distinguish Efficient Item Pricing combinations from inefficient ones and thereby provide a scientific tool by which rational contractors may optimally price a project’s items. A brief history of unbalanced bidding describes the field that was pioneered in the 1960’s by Marvin Gates and Robert Stark, as well as the subsequent contributions by the leading researchers in the field.

Suggested Citation

  • David Cattell & Paul Bowen & Ammar Kaka, 2004. "A model to distribute mark-up amongst quotation component item," Econometrics 0408009, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:0408009
    Note: Type of Document - pdf; pages: 12
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    References listed on IDEAS

    as
    1. Beedles, William L., 1978. "Evaluating Negative Benefits," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(1), pages 173-176, March.
    2. Lawrence Friedman, 1956. "A Competitive-Bidding Strategy," Operations Research, INFORMS, vol. 4(1), pages 104-112, February.
    3. M Skitmore, 2002. "Predicting the probability of winning sealed bid auctions: a comparison of models," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 53(1), pages 47-56, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    unbalanced bidding; bidding models; item price loading; modern portfolio theory; construction industry; mathematical models; bidding strategies;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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