Game Subcontracting Bid

In the modern society, the bidding and auction has won the acceptance of marketparticipants and the society as a whole with its unique characteristics such as openness,fairness and justice, and a large number of economic transactions were done by the biddingand auction. With the development of China economy, even large enterprises are difficultto complete the large project independently that has important implications for economic.In order to increase the profits, share the risk, and adapt to the requirement of marketeconomy, general pyramid structure of bid-subcontract has become an important form ofthe bidding.At present, the study of the subcontract is still limited to legal, procedural andpractical level. The lack of study from the perspective of subcontract mechanism theoryand the participants’ pricing strategy is seriously restricting the subcontract demand and itspractice.This article selects the subcontract bidding under the incomplete information.Through the study of the participants, it can provide some reference to the participants whochoose the appropriate bidding in the practice and the bidder who determines biddingstrategy. We hope it could promote the development of our country’s present biddingtheory and system.This paper set up an incomplete information static two-phase game model, then itresearch the subcontractor bidding strategies, the equilibrium price and the influence of thesubcontract bidding to the second stage. When private cost of the general contractor isfixed, game theory model was used to solve the subcontractor’s bidding strategies, and arecompared with those of the standard auction model. It is concluded that the pricing strategyof the subcontractor in the first phase is influenced by the second stage biddingenvironment; then in the general model the paper proves than the conclusion of thesimplified model is robust. The total cost of the general contractor endogenously dependson the second stage bidding. This is different from the standard tender proposition. Finallywe study the influence of the endogenous cost on the second stage bidding such as theoptimal open reserve price and existence of entry cost.