Procurement auctions with avoidable fixed costs: an experimental approach

Bidders in procurement auctions often face avoidable fixed costs. This can make bidding decisions complex and risky, and market outcomes volatile. If bidders deviate from risk neutral best responses, either due to faulty optimization or risk attitudes, then equilibrium predictions can perform poorly. In this paper, we confront laboratory bidders with three auction formats that make bidding difficult and risky in different ways. We find that measures of `difficulty' provide a consistent explanation of deviations from best response bidding across the three formats. In contrast, risk and loss preferences cannot explain behavior across all three formats.Auctions; Experimental; Procurement; Synergies; Asymmetric Bidders; Learning; Optimization errors

Procurement auctions with avoidable fixed costs: an experimental approach

Bidders in procurement auctions often face avoidable fixed costs. This can make bidding decisions complex and risky, and market outcomes volatile. If bidders deviate from risk neutral best responses, either due to faulty optimization or risk attitudes, then equilibrium predictions can perform poorly. In this paper, we confront laboratory bidders with three auction formats that make bidding difficult and risky in different ways. We find that measures of `difficulty' provide a consistent explanation of deviations from best response bidding across the three formats. In contrast, risk and loss preferences cannot explain behavior across all three formats

Auction Design with Avoidable Fixed Costs: An Experimental Approach

Advances in information technology and computational power have opened the doors for auctioneers to explore a range of auction formats by considering varying degrees of bid expressivity and different payment rule, e.g., single price vs. discriminatory prices. While it is clear that one can design more complicated auctions, it is still not clear if should do so and which auction parameters have the greatest impact on the performance on cost and efficiency. The purpose of this paper is to gain some insight into this question, via analytical and experimental methods

The Importance of Ordering in Sequential Auctions

To date, the largest part of literature on multi-unit auctions has assumed that there are k homogeneous objects being auctioned, where each bidder wishes to win exactly one or all of k units. These modeling assumptions have made the examination of ordering in sequential auctions inconsequential. The aim of this paper is to introduce and highlight the critical influence that ordering can have on the efficiency of an auction. We study a buyer who outsources via sequential 2nd-price auctions two heterogeneous jobs, and faces a diverse set of suppliers with capacity constraints.Auctions, Sequential, Vickrey, Procurement

The Effect of Asymmetric Bidder Size on an Auction's Performance: Are More Bidders Always Better?

One commonly held belief in designing auctions is that increasing the number of bidders makes an auction more competitive. Therefore, a buyer who wishes to minimize her procurement costs is better off inviting more suppliers to participate. In this paper, we question the validity of this belief by shedding light on bidders' behavior when bidders experience economies of scale in production and differ in their production capacity. We consider a setting with two different sized bidders, global and small. We assume that global bidders have a large production capacity (can win in more than one auction) and experience economies of scale in production, whereas small bidders can win in at most one auction. In this new setting, we focus on the impact of allowing both global and small suppliers to compete against each other on the performance of an auction.sequential auctions, procurement, synergies, asymmetric bidders

Coordinated resource allocation among multiple agents with application to autonomous refueling and servicing of satellite constellations

Issued as final reportUnited States. Air Forc

Supply Contract Competition and Sourcing Policies

Advances in information technology have opened new venues for companies to create flexible supply chains by offering high-speed communication and tight connectivity. A growing number of companies are taking advantage of new opportunities to outsource portions of their production and other operations. Given the importance of the supplier selection process in the ultimate success of a product, a purchasing manager must understand the different sourcing strategies that she or he can use and the suitability of each sourcing arrangements for her or him. This paper provides an overview of the research that has been done in the fields of operations research and economics on the topic of sourcing strategies. In aggregate, this paper provides a blueprint of what market characteristics can heavily influence a buyer-supplier relationship and, hence, are important to identify and incorporate into the supplier selection process.auctions, sole, dual, parallel, and multiple sourcing, mechanism design, procurement, outsourcing

The Efficiency of Multi-Unit Electricity Auctions

Using a complete information game-theoretic model, we analyze the performance of different electricity auction structures in attaining efficiency (i. e., least-cost dispatch). We find that an auction structure where generators are allowed to bid for load "slices" outperforms an auction structure where generators submit bids for different hours in the day.