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

Bargaining power and supply base diversification

In this paper, the authors examine a supply base diversification problem faced by a buyer who periodically holds auctions to award short term supply contracts among a cohort of suppliers (i.e., the supply base). To mitigate significant cost shocks to procurement, the buyer can diversify her supply base by selecting suppliers from different regions. The authors find that the optimal degree of supply base diversification depends on the buyer’s bargaining power, i.e., the buyer’s ability to choose the auction mechanism. At one extreme, when the buyer has full bargaining power and thus can dictatorially implement the optimal mechanism, she prefers to fully diversify. At the other extreme, when the buyer uses a reverse English auction with no reserve price due to her lack of bargaining power, she may consider protecting herself against potential price escalation from cost-advantaged suppliers by using a less diversified supply base. The authors find that in general the more bargaining power the buyer has to control price escalation from cost-advantaged suppliers the more she prefers a diversified supply base. This insight is shown to be robust to correlation between regional costs, asymmetry across regions, and intermediate levels of bargaining power.supply base diversification; supplier; buyer; procurement; bargaining

Auctioning Bulk Mobile Messages

The search for enablers of continued growth of SMS traffic, as well asthe take-off of the more diversified MMS message contents, open up forenterprises the potential of bulk use of mobile messaging , instead ofessentially one-by-one use. In parallel, such enterprises or valueadded services needing mobile messaging in bulk - for spot use or foruse over a prescribed period of time - want to minimize totalacquisition costs, from a set of technically approved providers ofmessaging capacity.This leads naturally to the evaluation of auctioning for bulk SMS orMMS messaging capacity, with the intrinsic advantages therein such asreduction in acquisition costs, allocation efficiency, and optimality.The paper shows, with extensive results as evidence from simulationscarried out in the Rotterdam School of Management e-Auction room, howmulti-attribute reverse auctions perform for the enterprise-buyer, aswell as for the messaging capacity-sellers. We compare 1- and 5-roundauctions, to show the learning effect and the benefits thereof to thevarious parties. The sensitivity will be reported to changes in theenterprise's and the capacity providers utilities and prioritiesbetween message attributes (such as price, size, security, anddelivery delay). At the organizational level, the paper also considersalternate organizational deployment schemes and properties for anoff-line or spot bulk messaging capacity market, subject to technicaland regulatory constraints.MMS;EMS;Mobile commerce;SMS;multi-attribute auctions

Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration

It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes, this improvement is not the result of price feedback

Competition Between Auctions

Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical and analytical methods in the analysis of competition between auctions.auctions, bidding, competition, auction formats, auction houses

Multi-item Vickrey-Dutch auctions

Descending price auctions are adopted for goods that must be sold quickly and in private values environments, for instance in flower, fish, and tobacco auctions. In this paper, we introduce ex post efficient descending auctions for two environments: multiple non-identical items and buyers with unit-demand valuations; and multiple identical items and buyers with non-increasing marginal values. Our auctions are designed using the notion of universal competitive equilibrium (UCE) prices and they terminate with UCE prices, from which the Vickrey payments can be determined. For the unit-demand setting, our auction maintains linear and anonymous prices. For the homogeneous items setting, our auction maintains a single price and adopts Ausubel's notion of "clinching" to compute the final payments dynamically. The auctions support truthful bidding in an ex post Nash equilibrium and terminate with an ex post efficient allocation. In simulation, we illustrate the speed and elicitation advantages of these auctions over their ascending price counterparts.

Endogenous Market Institutions: Experimental Evidence

A wide variety of market institutions exist in the field and on the Internet. Examples are English auctions and two-sided marketplaces like the double auction where both buyers and sellers initiate prices. This paper investigates how the emergence of (different) market institutions is shaped by buyers’ and sellers’ institutional preferences. The experimental evidence reveals that both buyers and sellers in the main prefer market institutions that restrict the ability to make price offers to their side of the market. However, when buyers and sellers are allowed to express both first and second choices, the double auction emerges as the most viable market institution.Market institutions, institutional preferences, voting rules, experimental economics

Rational Participation Revolutionizes Auction Theory

Potential bidders respond to a seller's choice of auction mechanism for a common-value or affiliated-values asset by endogenous decisions whether to incur a participation cost (and observe a private signal), or forego competing. Privately informed participants decide whether to incur a bid-preparation cost and pay an entry fee, or cease competing. Auction rules and information flows are quite general; participation decisions may be simultaneous or sequential. The resulting revenue identity for any auction mechanism implies that optimal auctions are allocatively efficient; a nontrivial reserve price is revenue-inferior for any common-value auction. Characterization of optimal auctions is otherwise contentless, in that any auction that sells without reserve is within the setting of one continuous parameter of an optimal auction; seller's surplus-extracting tools are now substitutes, not complements. Revenue comparisons from the exogenous-bidders literature are upheld in a half-space of parameters, overturned in a half-space. Many econometric studies of auction markets are seen to be flawed in their identifcation of the number of bidders.optimal auctions, endegenous bidder participation, affiliated-values, common-value auctions, surplus-extracting devices