Queueing Theoretic Analysis of Contractors' Sequential Bidding Problems--I.

by L. H. Zachs

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Investigation of the bidding and allocation problems of a contractor with a fixed amount of resources who produces under time-incentive contracts. The contractor simultaneously services several contracts; whenever a request for proposal (RFP) arrives, he will have his fixed resources spread among a number of contracts in various stages of completion. Decisions he must make are: (1) what to bid on the new contract described in the RFP, (2) how to reallocate his resources if he wins the contract, and later, (3) how to allocate when the contract is completed. This paper considers a contractor model in which the contractor operates on a simple "first come, first serve" policy, M/M/1 queue. The optimal bidding decision depends on the number of customers waiting to be served when the RFP arrives. A simple recurrence formula is developed to compute the optimal bid and determine sufficient conditions, so that the number of customers served at any given time is bounded. Results are extended to the G/M/1 queue. 29 pp. Ref.

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