Finance:Buyer-determined auction
A buyer-determined auction is a type of reverse auctions in a procurement setting, also known simply as procurement auctions. These are auctions where bidders are the sellers, and they bid on a contract to provide supplies to the buyer. A common form of procurement auction is known as a scoring auction. In that auction form, the score that the buyer gives each bidder depends on well-defined attributes of the offer and the bidder. This scoring function is formulated and announced prior to the start of the auction.
More commonly, many procurement auctions are “buyer determined” in that the buyer reserves the right to select the winner on any basis following the conclusion of the auction. The literature on buyer-determined auctions is often empirical in nature and is concerned with identifying the unannounced implicit scoring function the buyer uses. This is typically done through a discrete choice model, wherein the econometrician uses the observed attributes, including price, and maps them to the probability of being chosen as the winner. This allows the econometrician to identify the weight on each attribute. [1] Conceptually and theoretically, the effect of this format on buyer-supplier relationships is of paramount importance.[2]
Theoretically, the factors that determine under what circumstances a buyer would prefer this format have been explored. [3][4]
References
- ↑ Jap, S. D., & Haruvy, E. (2008). Interorganizational relationships and bidding behavior in industrial online reverse auctions. Journal of Marketing Research, 45(5), 550-561.
- ↑ Jap, S. D. (2007). The impact of online reverse auction design on buyer–supplier relationships. Journal of Marketing, 71(1), 146-159.
- ↑ Engelbrecht-Wiggans, R., Haruvy, E., & Katok, E. (2007). A comparison of buyer-determined and price-based multiattribute mechanisms. Marketing Science, 26(5), 629-641.
- ↑ Katok, Elena, and Achim Wambach. "Collusion in dynamic buyer-determined reverse auctions." Management Science (2008): 1-27.
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