Abstract
In this paper we study two reverse auction formats in a single period setting, the sealed pay-as-bid and the open format, when suppliers are capacity constrained. In the pay-as-bid format we characterize the asymmetric bidding equilibrium for the case of two suppliers with uniformly distributed cost. We find that the pay-as-bid auction allocates business inefficiently and that a supplier's bid is nonincreasing in the opponent's capacity and is typically decreasing in its own capacity. We then characterize a descending price-clock open auction implementation and find that it is optimal and that the buyer's expected cost decreases as capacity is more evenly spread. Finally, we find that the pay-as-bid auction results in a higher expected cost to the buyer as compared to the open auction.
Original language | English |
---|---|
Article number | 13046 |
Pages (from-to) | 987-995 |
Number of pages | 9 |
Journal | European Journal of Operational Research |
Volume | 247 |
Issue number | 3 |
DOIs | |
Publication status | Published - 16 Dec 2015 |
Keywords
- Asymmetric auctions
- Auctions/bidding
- Purchasing