A game theoretic approach to a two firm bidding problem

W. D. Cook, M. J. L. Kirby and S. L. Mehndiratta

Naval Research Logistics Quarterly, 1975, vol. 22, issue 4, 721-739

Abstract: In this paper a model is developed for determining optimal strategies for two competing firms which are about to submit sealed tender bids on K contracts. A contract calls for the winning firm to supply a specific amount of a commodity at the bid price. By the same token, the production of that commodity involves various amounts of N different resources which each firm possesses in limited quantities. It is assumed that the same two firms bid on each contract and that each wants to determine a bidding strategy which will maximize its profits subject to the constraint that the firm must be able to produce the amount of products required to meet the contracts it wins. This bidding model is formulated as a sequence of bimatrix games coupled together by N resource constraints. Since the firms' strategy spaces are intertwined, the usual quadratic programming methods cannot be used to determine equilibrium strategies. In lieu of this a number of theorems are given which partially characterize such strategies. For the single resource problem techniques are developed for determining equilibrium strategies. In the multiple resource problem similar methods yield subequilibrium strategies or strategies that are equilibrium from at least one firm's point of view.

Date: 1975
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/nav.3800220408

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:22:y:1975:i:4:p:721-739

Access Statistics for this article

More articles in Naval Research Logistics Quarterly from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().