Predicting the probability of winning sealed bid auctions: The effects of outliers on bidding models

Martin Skitmore*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

21 Citations (Scopus)

Abstract

This paper is concerned with the effect of outliers on predictions of the probability of tendering the lowest bid in sealed bid auctions. Four of the leading models are tested relative to the equal probability model by an empirical analysis of three large samples of real construction contract bidding data via all-in (in-sample), one-out and one-on (out-of-sample) frames. Outliers are removed in a sequence of cut-off values proportional to the standard deviation of bids for each auction. A form of logscore is used to measure the ability to predict the probability of each bidder being the lowest. The results show that, although statistically significant in some conditions, all the models produce rather poor predictions in both one-out and one-on mode, with the effects of outliers being generally small.

Original languageEnglish
Pages (from-to)101-109
Number of pages9
JournalConstruction Management and Economics
Volume22
Issue number1
DOIs
Publication statusPublished - Jan 2004
Externally publishedYes

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