An Empirical Exploration of Multi-Attribute Bidding: Redefining Intermediary Roles in Electronic Markets

The vast majority of electronic markets have been based purely on a single variable (price) as the factor that determines ‘the winner’. Multi-attribute auctions are likely to be more appropriate for procurement scenarios where factors other than price need to be considered in determining the outcome. Nevertheless, there is a scarcity of empirical research on multi-attribute electronic auctions. In particular, there is little empirical evidence of how multi-attribute auctions fit with our theoretical conceptualisation of electronic markets. This paper uses the market design aspects of multi-attribute auctions to explore a multivariable electronic auction, using frameworks from electronic market process design and systematic sourcing. Evidence from the case study illustrates that multi-variable electronic auctions can be used to procure a wider range of operating and manufacturing input that has been considered possible with traditional, price only, auctions. The findings reveal how the use of an electronic auction intermediary creates a middle ground of interaction between spot and systematic sourcing, by automating for the buyer certain general parameters and trade context processes

Electronic Reverse Auctions: Spawning Procurement Innovation in the Context of Arab Culture

Government e-procurement initiatives have the potential to transform local institutions, but few studies have been published of strategies for implementing specific e-procurement tools, particularly involving procurement by a foreign government adapting to local culture in the Middle East/North Africa (MENA). This case describes procurement at a forward operating base (FOB) in Kuwait in support of operations in Iraq. The government procurers had to deal with a phenomenon unique to the MENA region: wasta. Wasta is a form of social capital that bestows power, influence, and connection to those who possess it, similar to guanxi in China. This study explores the value proposition and limitations of electronic reverse auctions (eRA) with the purpose of sharing best practices and lessons learned for government procurement in a MENA country. The public value framework provides valuable theoretical insights for the implementation of a new government e-procurement tool in a foreign country. In a culture dominated by wasta, the suppliers enjoyed the transparency and merit-based virtues of eRA’s that transferred successfully into the new cultural milieu: potential to increase transparency, competition, efficiency, and taxpayer savings. The practices provided herein are designed specifically to help buyers overcome structural barriers including training, organizational inertia, and a lack of eRA policy and guidance while implementing a new e-procurement tool in a foreign country

Crowd-sourcing with uncertain quality - an auction approach

This article addresses two important issues in crowd-sourcing: ex ante uncertainty about the quality and cost of different workers and strategic behaviour. We present a novel multi-dimensional auction that incentivises the workers to make partial enquiry into the task and to honestly report quality-cost estimates based on which the crowd-sourcer can choose the worker that offers the best value for money. The mechanism extends second score auction design to settings where the quality is uncertain and it provides incentives to both collect information and deliver desired qualities

Buying bundles: the effects of bundle attributes on the value of bundling

We consider the situation in which a buyer has to find the optimal degree of bundling for buying goods and services. From a review of the literature we develop attributes associated with bundling. Each of these attributes has an effect on the value of a bundle. Combined, the attributes determine the value of a bundle. We describe how the various attributes of a bundle contribute to the value of a bundle given the context of the buying situation. Based on interviews, a further analysis of bundle attributes and their effects on the bundle value is provided. The results of this analysis can be used to assist in finding the optimal degree of bundling

Deciding on the Appropriateness of B2B Reverse Auction Technology Adoption: An AHP Approach Combined with Integer Programming

Although Business-to-Business online reverse auctions have emerged as a promising purchasing tool, no research has been found that provides a model to assess the reverse auction decision in a systematic way. This paper fills this gap by presenting an integrated approach, utilizing Analytic Hierarchy Process techniques and an Integer Programming Formulation, to decide whether Reverse Auction Technology (RAT) adoption is cost-effective and appropriate. The model developed is a practical decision support tool that allows for the consideration of both qualitative and quantitative decision factors, and for the adoption of multiple modes of RATs, which are contrasted to traditional purchasing

Preference Revelation in Multi-Attribute Reverse English Auctions: A Laboratory Study

The effects of preference revelation on allocational and Pareto efficiency are studied in a multi-attribute reverse English auction. Multi-attribute reverse auctions have been proposed as market institutions for electronic request for quotation buying processes. Preference revelation is a crucial question in multi-attribute reverse auctions in terms of the efficiency of auction outcomes. Results from a computer-based laboratory experiment are reported and auction outcomes are analyzed regarding the buyer’s and suppliers’ surplus, efficiency, and Pareto efficiency. The results show that suppliers make more profits when preferences are revealed, but not at the expense of the buyer, and that full revelation of the buyer’s preferences significantly increases allocational and Pareto efficiency

Buyer Commitment and Opportunism in the Online Market for IT Services

Companies increasingly outsource IT-related tasks using reverse auction mechanisms embedded into online marketplaces. However, a considerable proportion of auctions at these marketplaces do not result in a contract between buyer and supplier. Extant literature mostly refers to costly bidding and bid evaluation to explain this phenomenon. Another possible explanation is that because of the low entry barriers, buyers with a low commitment to exchange can use the marketplace solely for information gath-ering purposes such as price benchmarking and obtaining free consultations, having little or no intention to contract a supplier. We test this explanation by looking at how different types of costs incurred by the buyer during the sourcing process, are related to the outcome of reverse auctions in terms of contract award. We argue that higher levels of search, preparation and negotiation costs are associated with higher commitment to exchange and find that opportunistic behaviour does indeed play a part in the non-contracted projects, while committed buyers are more likely to enter into a contract with a supplier. The hypotheses are tested on a sample of 2,574 reverse auctions at a leading online marketplace for IT services and further verified across projects of different value and different levels of buyer experience. On the practical side, we recommend setting up entry barriers for buyers with a low level of commitment.IT Outsourcing;Online Markets;Opportunism;Reverse Auctions;Transaction Costs

Design and Evaluation of Feedback Schemes for Multiattribute Procurement Auctions

Multiattribute auctions, which allow bids on multiple dimensions of the product, are IT-enabled sourcing mechanisms that increase the efficiency of procurement for configurable goods and services compared to price-only auctions. Given the strategic nature of procurement auctions, the amount of information concerning the buyer’s preferences that is disclosed to the suppliers has implications on the profits of the buyer and suppliers and, consequently, on the long-term relationship between them. This study develops novel feedback schemes for multiattribute auctions that protect buyer’s preference information from the supplier and suppliers’ cost schedule from the buyer. We conduct a laboratory experiment to study bidder behavior and profit implications under three different feedback regimes. Our results indicate that bidders are able to extract more profit with more information regarding the state of the auction in terms of provisional allocation and prices. Furthermore, bidding behavior is substantially influenced by the nature and type of feedback