ENDOGENOUS RISK IN UNBALANCED BIDDING misbe2011 Tracking Number 82Presentation: Session: General Paper Session W55 - Economics of the built environment/ Whole life cost-benefit-modelling Room: Skippers cafe Session start: 11:00 Mon 20 Jun 2011 Svante Mandell svante.mandell@vti.se Affifliation: VTI Johan Nystrom johan.nystrom@vti.se Affifliation: VTI Topics: - Economics of the building environment (General Themes), - Construction bidding and contracting (General Themes) Abstract: Models of unbalanced bidding in unit price contracts (UPC) can be categorised into two types. The first category assists clients in detecting and contractors in optimising skew bidding. More theoretical oriented models of the second type focus on bidding behaviour in order to study market efficiency. These models predict corner solutions, i.e. zero prices, for unit prices of expected overestimated quantities. However, anecdotal evidence indicates a lack of zero prices in the actual contracts. A possible explanation for this discrepancy is risk-aversion of the contractor. However, none of the models of the latter category have incorporated risk as an endogenous variable. A model of such is presented in this paper. |