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Seal Bidding

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1) In your opinion, is the sealed-bid method better than the negotiation method? Give an example.

2) Provide an example of a case where you would want, as a bidder, to use the negotiation method. Explain your preference.

3) Speculate on the reasons for the concern addressed in the report.

4) Assess the recommendations in the report. Are they useful? Effective? Fair? Realistic? Explain your answers.

The attached PDA is for questions 3 and 4.

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1) In your opinion, is the sealed-bid method better than the negotiation method? Give an example.

Yes, the sealed bid is better. The sealed bidding process allows for the best value because the lowest evaluated priced offer is selected. Also, there is no need to answer questions from the bidders because all of the requirements are outlined in the clear and complete list of requirements ('Sealed Bids FAR' n.d.). The sealed bid is a good option for the bidder that can provide services at the lowest price. Typically, the best bidders will be very large companies that can accept contracts at a smaller margin than other companies.

2) Provide an example of a case where you would want, as a bidder, to use the negotiation method. Explain your preference.

When bidding on U.S. military (Department of Defense) contracts, the negotiation method is the best option from perspective of bidder. In this case, the Department of Defense prefers to have a large number of qualified bidders. The bidder also has an opportunity to discuss the bid with the bid reviewers to clearly understand ...

Solution Summary

The expert determines whether the sealed-bid method is better than the negotiation methods.

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1. Show that, in a second-price sealed bid auction with private values, bidders bid their true valuations of the object for auction.
2. In a second-price sealed bid auction, there are 2 bidders. The value to bidder i of the object for auction is Xi, and the realization of this value is information private to bidder i. The Xi's are uniformly and independently distributed over {0,1}. The object for auction is of no value to the seller. The seller's reserve price is r, and the seller and bidders are risk neutral. What is the seller's expected profit when r=0? What value for r is optimal for the seller, and what then is the seller's expected profit?

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