General information
This model uses Bayesian-Bertrand competition to compute the Nash Equilibrium optimal bid price.
Additionally, the model provides the probability of winning the tender when bidding with the optimal bid price.
Model assumptions
“Winner takes it all” design: only the lowest bid is granted supply for the whole tender. Therefore, profit is positive only if the tender is won.
Prices are submitted simultaneously, and competitors choose their bids to maximize their expected profit.
Products are homogeneous between competitors (no differentiation), yet their costs can differ.
Each competitor knows their costs but can only guess the range in which the competitors' costs will lie.