Bidding Models — The Final Resolution of a Controversy

There has been a controversy over the correct formula to use in computing the probability of winning a contract by competitive bidding. Friedman and Gates have put forward differing views, and Rosenshine has attempted to reconcile them. In this paper the underlying structure of the bidding situation is examined in detail and a full probability model is developed. A revised procedure for computing the probability is set out, in which use is made of Bayes theorem, and this is illustrated by a simple worked example.