How to Eliminate Collusion in Tenders and Auctions, using Game Theory (Determination of Ceiling and Floor Prices)

Governments and firms in accordance to their duties, obliged to inevitably contracts with Individuals and legal entities, especially in auction and tender process. Since, the law of conducting tenders and auctions is lacking efficiency and has major objection, therefore, this has led to the dissemination and development of areas of corruption in these contracts (through collusion). In this paper, in order to eliminate collusion, the Nash equilibrium points have been obtained by designing a static game and solving it using game theory. The results show the maximum of the ceiling prices, As well as the minimum of floor prices at which the bidder chooses to eliminate collusion between the two tenderers. At last, it is recommended that the governments and bidding firms use the results of this research and neutralize collusion by setting ceiling and floor prices.