On the distribution of bids for construction contract auctions

Pablo Ballesteros-Pérez*, Martin Skitmore

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

9 Citations (Scopus)
11 Downloads (Pure)

Abstract

The statistical distribution representing bid values constitutes an essential part of many auction models and has involved a wide range of assumptions, including the Uniform, Normal, Lognormal and Weibull densities. From a modelling point of view, its goodness is defined by how well it enables the probability of a particular bid value to be estimated–a past bid for ex-post analysis and a future bid for ex-ante (forecasting) analysis. However, there is no agreement to date of what is the most appropriate form and empirical work is sparse. Twelve extant construction data-sets from four continents over different time periods are analysed in this paper for their fit to a variety of candidate statistical distributions assuming homogeneity of bidders (ID not known). The results show there is no one single fit-all distribution, but that the 3p Log-Normal, Fréchet/2p Log-Normal, Normal, Gamma and Gumbel generally rank the best ex-post and the 2p Log-Normal, Normal, Gamma and Gumbel the best ex-ante–with ex-ante having around three to four times worse fit than ex-post. Final comments focus on the results relating to the third and fourth standardized moments of the bids and a post hoc rationalization of the empirical outcome of the analysis.

Original languageEnglish
Pages (from-to)106-121
Number of pages16
JournalConstruction Management and Economics
Volume35
Issue number3
DOIs
Publication statusPublished - 4 Mar 2017
Externally publishedYes

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