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A probabilistic pricing model for a company's projects
Blekinge Institute of Technology, School of Engineering.
2012 (English)Independent thesis Basic level (degree of Bachelor)Student thesisAlternative title
En probabilistisk prissättningsmodell för ett företags projekt (Swedish)
Abstract [en]

The company’s pricing is often highly impacted by the estimation of competitors’ project costs, which also is the main scope in this degree project. The purpose is to develop a pricing model dealing with uncertainties, since this is a main issue in the current pricing process. A pre-study has been performed, followed by a model implementation. An analysis of the model was then made, before conclusions were drawn. Project cost estimation foremost, but also probability distribution functions and pricing as a general concept, were investigated in the mainly literary pre-study. Two suitable methods for project cost estimation were identified; Monte Carlo simulation and Hierarchy Probability Cost Analysis. These lead to a theoretical project cost estimation model. A model was implemented in Matlab. It treats project cost estimation, but no other pricing aspects. The model was developed based on the theoretical one to the extent possible. Project costs were broken down in sub costs which were included in a Monte Carlo simulation. Competitors’ project costs were estimated using this technique. To analyse the model’s accuracy was difficult. It differs from the theoretical one in terms of how probability distribution functions and correlations are estimated. These problems depend on projects with shifting characteristics and limited data and time. A solid framework has been created though. Improvement possibilities exist, e.g. more accurate estimates and a model handling other pricing aspects. The major threat is that nobody maintains the model. Anyway, estimates are not more than just estimates. The model should therefore be viewed as a helpful tool, not an answer.

Abstract [sv]

Företagets prissättning påverkas ofta till stor del av estimeringen av konkurrenters projektkostnader, vilket också är huvudområdet i detta examensarbete. Syftet är att utveckla en prissättningsmodell som hanterar osäkerheter, då detta är ett stort problem i rådande prissättningsprocess. En förstudie har utförts, följt av en modellimplementation. En analys av modellen gjordes sedan, innan slutsatser drogs. Projektkostnadsestimering främst, men även sannolikhetsfunktioner och prissättning som ett allmänt koncept, undersöktes i den i huvudsak litterära förstudien. Två lämpliga metoder för projektkostnadsestimering identifierades; Monte Carlo-simulering och Hierarchy Probability Cost Analysis. Dessa ledde till en teoretisk modell för projektkostnadsestimering. En modell implementerades i Matlab. Den behandlar projektkostnadsestimering, men inga andra prissättningsaspekter. Modellen utvecklades baserat på den teoretiska i möjlig utsträckning. Projektkostnader bröts ner i delkostnader som estimerades för konkurrenterna. Dessa ingick i en Monte Carlo-simulering. Konkurrenters projektkostnader estimerades med hjälp av denna teknik. Att analysera modellens noggrannhet var svårt. Den skiljer sig från den teoretiska beträffande hur sannolikhetsfunktioner och korrelationer estimeras. Dessa problem beror på projekt med skiftande karaktärsdrag samt begränsad data och tid. Ett solitt ramverk har dock skapats. Förbättringsmöjligheter finns, t.ex. noggrannare estimat och en modell som behandlar andra prissättningsaspekter. Det huvudsakliga hotet är att ingen underhåller modellen. Hur som helst är estimat inte mer än estimat. Modellen ska därför ses som ett hjälpverktyg, inte ett facit.

Place, publisher, year, edition, pages
2012. , 82 p.
Keyword [en]
Project cost estimation, Pricing, Probability distribution function, Monte Carlo simulation, Cost breakdown
National Category
Probability Theory and Statistics Other Mechanical Engineering Business Administration
Identifiers
URN: urn:nbn:se:bth-1099Local ID: oai:bth.se:arkivex6FF01904499B4790C1257AED0040F5DEOAI: oai:DiVA.org:bth-1099DiVA: diva2:828257
Educational program
IEACI Master of Science in Industrial Management and Engineering
Uppsok
Social and Behavioural Science, Law
Supervisors
Available from: 2015-05-25 Created: 2013-01-08 Last updated: 2015-12-07Bibliographically approved

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Citation style
  • apa
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  • Other locale
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Output format
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