Three Quantitative Management Problems in Public Procurement and Decision Procedures for their Analysis and Solving

Three management problems that a state (or a public administration acting on its behalf) faces in procuring goods and/or services are considered: a) choosing the type of a contract to be awarded and the type of a competitive bidding to determine the winning bid, b) setting the initial price for a contract being the subject of the bidding, and c) designing (or choosing) a set of rules for determining the winning bid by means of the chosen competitive bidding. Mathematical models and decision procedures for analyzing and solving these problems are discussed

Timber selling policies using bundle-based auction : the case of public forests in Québec

In the province of Québec, the government provides 25% of the volume of timber that is annually cut in crown forests through sealed-bid one-winner auctions. It was noted that many offers are made for some areas but few or none are made for many other areas. As such, a significant number of the timber volumes remains unsold. However, the combination of areas to form bundles can provide economy of scale that is not seen otherwise. We highlight some issues regarding the current allocation system and we analyse the effectiveness of different bundling systems in maximizing government revenues and enhancing bidders' competitiveness. We use actual forest data to evaluate different rules and strategies for the creation and allocation of partial and full bundles. Our results suggest that the use of the option of bundling forests areas makes the auction process more beneficial to the majority of stakeholders: Government revenues are increased; the bidding companies are more likely to obtain the desired volumes and pay less for harvesting and equipment relocation; and greenhouse gas emissions are reduced

Classical Theory of Competitive Market Price Formation

We offer an information theory of market price formation, formalizing and elaborating on an old, implicit, classical tradition of supply and demand based on buyers’ and sellers’ mone-tary valuations of commodities (formally their reservation prices) and competition as a multilat-eral higgling and bargaining process. The early laboratory market experiments, as it turns out with hindsight, established the remarkable stability, efficiency, and robustness of the old view of competitive price discovery, and not the neoclassical price theory (based on individual utility and profit maximization for given prices). Herein, we present a partial-equilibrium version of the the-ory in which wealth is implicitly constant, and reservation values are fixed, as in the early exper-iments, formulating an information interpretation à la Shannon that corresponds with modern notions of the pricing system as an information signaling system. Competitive equilibrium price, we show, conveys maximum information about the distribution of traders’ valuations. We illus-trate the theory as it applies to a few market conditions (notably a non-clearing market case) and institutions (posted-price market, English auction, double auction, sealed-bid call market)

Overweight Vehicle Permitting Alternatives

Overweight vehicles exceed the federal and/or state statutory limits for either the gross vehicle weight (GVW) or the weight of individual axles or axle groups. National and state limits on vehicle weights were established to preserve the highway infrastructure. Past research has shown that overweight operations, while causing significant damage to roads and bridges, can enhance the trucking industry productivity, and thus yield economic benefits both regionally and nationally. In the United States, individual states administer oversize and overweight vehicle permit programs to regulate and collect revenues from overweight operations. Differences in the truck size and weight limits and overweight permit programs across the states inhibit seamless and efficient truck travel across the country. Agencies responsible for maintaining the highway infrastructure realize that the cost of consumption of the infrastructure far exceeds the collected revenues. The current study examines four options to improve overweight vehicle permitting systems: multiobjective optimization of traditional mechanisms, incentives for infrastructure-friendly vehicles, application of an auction-based quota for overweight vehicle operations, and opportunities for harmonizing the regulations covering overweight vehicle operations that differ across the states. The first three options are qualitatively and quantitatively applied to a case study involving Indiana\u27s newly-established overweight commodity permits for vehicles carrying metal (up to 120,000 lbs), and agricultural (up to 97,000 lbs) goods. An incremental approach to harmonization of truck size and weight regulations and overweight vehicle permitting systems is qualitatively described, including available tools and data needs to promote harmonization. The four options are not mutually exclusive; collectively, they provide opportunities for transportation decision makers to improve overweight vehicle permitting. Each option contributes to the ongoing discussion about how to address the issue of uncompensated consumption of highway infrastructure assets attributable to overweight vehicles. The multiobjective optimization formulated herein better reflects actual decisions made by both the agency and carriers than limited previous quantitative research. The quantification of willingness to pay for investment informs state agencies about the extent to which incentives for infrastructure-friendly vehicles can be adopted. The quota framework contained herein is an extension of strategies used previously to mitigate demand into a tool for controlling the amount of allowable infrastructure damage while collecting necessary revenues to protect infrastructure from undue damage. Finally, the harmonization of overweight vehicle permitting programs can streamline interstate overweight operations for both state agencies and carriers. The combination of several options can result in greater improvements to both the trucking industry\u27s productivity and the preservation of highway infrastructure than any option alone

Auctions and bidding: A guide for computer scientists

There is a veritable menagerie of auctions-single-dimensional, multi-dimensional, single-sided, double-sided, first-price, second-price, English, Dutch, Japanese, sealed-bid-and these have been extensively discussed and analyzed in the economics literature. The main purpose of this article is to survey this literature from a computer science perspective, primarily from the viewpoint of computer scientists who are interested in learning about auction theory, and to provide pointers into the economics literature for those who want a deeper technical understanding. In addition, since auctions are an increasingly important topic in computer science, we also look at work on auctions from the computer science literature. Overall, our aim is to identifying what both these bodies of work these tell us about creating electronic auctions. © 2011 ACM.This work was funded in part by HP under the “Always on” grant, by NSF IIS-0329037 “Tools and Techniques for Automated Mechanism Design”, and by IEA (TIN2006-15662-C02-01), OK (IST-4-027253-STP), eREP(EC-FP6-CIT5-28575) and Agreement Technologies (CONSOLIDER CSD2007-0022, INGENIO 2010).Peer Reviewe

Theory of price formation in experimental markets

In this context statement I will overview joint theoretical work on competitive market price formation inspired by our reappraisal of experimental market findings and the classics of value theory

Optimal design of Dutch auctions with discrete bid levels.

The theory of auction has become an active research area spanning multiple disciplines such as economics, finance, marketing and management science. But a close examination of it reveals that most of the existing studies deal with ascending (i.e., English) auctions in which it is assumed that the bid increments are continuous. There is a clear lack of research on optimal descending (i.e., Dutch) auction design with discrete bid levels. This dissertation aims to fill this void by considering single-unit, open-bid, first price Dutch auctions in which the bid levels are restricted to a finite set of values, the number of bidders may be certain or uncertain, and a secret reserve price may be present or absent. These types of auctions are most attractive for selling products that are perishable (e.g., flowers) or whose value decreases with time (e.g., air flight seats and concert tickets) (Carare and Rothkopf, 2005). I began by conducting a comprehensive survey of the current literature to identify the key dimensions of an auction model. I then zeroed in on the particular combination of parameters that characterize the Dutch auctions of interest. As a significant departure from the traditional methods employed by applied economists and game theorists, a novel approach is taken by formulating the auctioning problem as a constrained mathematical program and applying standard nonlinear optimization techniques to solve it. In each of the basic Dutch auction model and its two extensions, interesting properties possessed by the optimal bid levels and the auctioneer's maximum expected revenue are uncovered. Numerical examples are provided to illustrate the major propositions where appropriate. The superiority of the optimal strategy recommended in this study over two commonly-used heuristic procedures for setting bid levels is also demonstrated both theoretically and empirically. Finally, economic as well as managerial implications of the findings reported in this dissertation research are discussed

Internet Auction Processes and Mechanisms

The nature of E-commerce over the Internet has seen significant changes over the years. Instead of companies selling items to consumers, consumers are increasingly selling items to fellow consumers on a global-scale, and Internet auctions have been the mechanism of choice in achieving this. In fact, auctioning allows the departure from the fixed price model, which some regard as too rigid to be able to respond swiftly to varying supply and demand fluctuations and changes, and the Internet plays a pivotal role in catalysing the widespread acceptance of such a variable pricing model on a global scale. Internet auctions exhibit characteristics which are often not shared by conventional auctions, e.g. auctions of xed duration which encourage sniping (bidders submit their bids moments before the close of an auction thereby preventing other bidders from submitting counter-bids), the acceptance of multiple bids in a single auction, and a maximum threshold whereby the auction will terminate at that price point. Internet auctions have significantly greater scope incorporating algorithms of increased complexity than conventional auction procedures. In this thesis, the characteristics and properties of different Internet auction algorithms are modelled mathematically based on a series of operational assumptions which characterise the arrival rate of bids, as well as the distribution from which the private values of buyers are sampled. From this, closed-form expressions of several key performance metrics are determined, including the average selling price in a given auction, as well as the average auction duration. In cases where a seller may be selling a commodity and auctions repeat themselves with the same items for sale multiple times, the income per unit time may also be qunatified. Simulation experiments have been performed and analysed in the context of the mathematical models, and reasonable agreements are observed