Some Interpretations of Sequential Bid Pricing Strategies

This note provides an alternative interpretation for sequential bid pricing strategies as initially formulated by Kortanek, Soden, and Sodaro [Kortanek, K. O., J. V. Soden, D. Sodabo. 1973. Profit analysis and sequential bid pricing models. Management Sci.20 (3, November) 396–417.]. In particular, bid prices obtained from the sequential model are shown to result from a condition which incorporates the failure rate function as a means of including probable actions of competing firms. A reformulation of the bidder's criterion function in the context of utility theory is also discussed and shown to result in bidding strategies which may also be interpreted in the proposed fashion.