Software frameworks for advanced procurement auction markets

Martin Bichler, Jayant R. Kalagnanam
2006 Communications of the ACM  
T raditional auctions such as the English and first-price sealed-bid auctions have been adopted as another tool for procurement negotiations. The competitive process of auctions serves to aggregate the scattered information about a bidder's valuation and to dynamically set the prices of a trade. As a result, support for auctions and competitive bidding has recently become an integral part of most software packages for electronic sourcing and procurement. Throughout the past decade many new
more » ... on formats have been developed, which support more general negotiation and resource allocation tasks. Information systems supporting these types of auctions promise high economic efficiency even in the case of complex preferences, but require special design considerations. The typical bidding process implemented by the sourcing auction software consists of these steps: bid submission, bid evaluation (also known as winner determination, market clearing, matching, or resource allocation), and the calculation of settlement prices, followed by some feedback to the bid-ders in an iterative, or open-cry auction (see Figure 1 ). The auctions close either at a fixed point in time or after a certain closing criterion is met (such as a certain time lapse). A fundamental shortcoming of auction tools today is their inability to allow for the creation of complex bidding events and request for quotes (RFQ), which allow for a variety of bid structures that exploit complementarities and economies of scale in cost structures of suppliers. As many organizations have begun to realize the efficacy of auctions, interest has emerged to extend basic auction types to support negotiations beyond price, and communicate bids with a more complex set of preferences. For example, procurement of direct inputs is usually very large (in total quantity and dollar value) and requires the use of special price negotiation schemes that incorporate appropriate business practices. Typically, bids in these settings have the following properties: • Transaction volume tends to be large and suppliers often provide volume discounts; • Suppliers often provide all-or-nothing bids on a set of items with a special discounted price; and • Items may have multiple, non-price attributes to be traded off against price attributes. Volume discount auctions facilitate negotiations on large quantities of a good [6]; combinatorial auctions allow bids on bundles of goods [4]; and multiattribute auctions facilitate negotiation on multiple attributes of an auction [1]. These multidimensional A range of versatile auction formats are coming that allow more flexibility in specifying demand and supply.
doi:10.1145/1183236.1183239 fatcat:4ml5g3fzk5a3bjjrdgtwqe4l2m