Procurement auctions with capacity constrained suppliers

Research output: Contribution to journalArticle

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 languageEnglish
Article number13046
Pages (from-to)987-995
Number of pages9
JournalEuropean Journal of Operational Research
Volume247
Issue number3
DOIs
Publication statusPublished - 16 Dec 2015

Fingerprint

Auctions
Costs
Clocks
Bidding
Reverse
Suppliers
Procurement auctions
Bid
Industry
Decrease
Buyers

Keywords

  • Asymmetric auctions
  • Auctions/bidding
  • Purchasing

Cite this

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Procurement auctions with capacity constrained suppliers. / Chaturvedi, Aadhaar.

In: European Journal of Operational Research, Vol. 247, No. 3, 13046, 16.12.2015, p. 987-995.

Research output: Contribution to journalArticle

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