Study On Bidding Mode Of Using Second-Price Sealed Auction Theory

As a mature trading system in market economy, Bidding has great importanceto the transferring economy of China. At present, study on bidding theory in Chinalimited only in laws and regulations, methods and procedures. There is little analysison the combination of theory and practice, say nothing to the study used moderneconomic theory. This drops behind to the fast economic development and therequirements of bidding practice in China.This Paper first analyzed both domestic and foreign construction projectsbidding status. Then the Paper showed problems in bidding system's development inChina. On the basis of the above mentioned content, the author analyzes thephenomenon of information dissymmetry in bidding system by using IncompleteInformation Game theory and related principle of Information Economy. Thisintends to illuminate that a practicable mechanism design needs to meet thecondition of participation constraint and incentive-compatibility constraint. On thebasis of Second-Price Sealed Auction theory and it's used economic theory andmethod, the Paper studies on application of Second-Price Sealed Auction theory inbidding system. Then the Paper sets up a bidding mode of "second lowest price isthe best". The Paper comprehensively analyzes the condition and theory foundationof the bidding mode of "second lowest price is the best" through Game Theory andMarket Competition Theory. This mode includes two stages: technical bidding andbusiness bidding, and it enable the owners to select the contractor with the lowestprice and contract with them at the second lowest price. Of course, the biddingshould meet the quality requirement. It proves to be practicable by positive study.This mode can solve the problem in mechanism design under the situation ofinformation dissymmetry and prevent adverse selection and moral hazard fromhappening. It also solves the problem that the tenderers may conceal the actualevaluation for target project, and realize the double-win between the tenderers andthe tenderees. The mode guarantees a high efficiency of bidding system andactualize an optimize combination of resources in the market economy.