Journal article
Markup Bid Pricing for Net Worth Maximisation and Target Profits
Industrial Management & Data Systems, Vol.86(5-6), pp.5-11
1986
Abstract
Essentially there are three types of competitive bids or price quotes: fixed price bids, cost-plus markup bids, and incentive (risk-sharing) bids. An "Expected Present Value" (EPV) model of competitive bidding is presented which establishes the requirements for the maximisation of the firm's expected present value of net worth. Reconciliation of the EPVC and the markup procedure allows an examination of the issues that must be considered in order that the firm's bid prices and quotes best serve the objective of net worth maximisation when information search costs are expected to be prohibitive. Observations suggest that firms do not attempt to maximise their net worth, preferring instead to pursue target rates of capacity utilisation and profitability. Therefore the EPVC model does not explain or predict the behaviour of all bidding firms. A behavioural model is suggested, based on the positive starting point of business practice. This enables firms to do what they do better. Based on what they already do, it holds few surprises or complexities and requires little information on complex issues and so obviates the need for substantial expenditure on search costs.
Details
- Title
- Markup Bid Pricing for Net Worth Maximisation and Target Profits
- Authors
- Evan J Douglas (Author) - University of the Sunshine Coast - Faculty of Business
- Publication details
- Industrial Management & Data Systems, Vol.86(5-6), pp.5-11
- Publisher
- Emerald Group Publishing Ltd.
- DOI
- 10.1108/eb057439
- ISSN
- 0263-5577
- Organisation Unit
- University of the Sunshine Coast, Queensland
- Language
- English
- Record Identifier
- 99449693602621
- Output Type
- Journal article
Metrics
3 File views/ downloads
823 Record Views