TY - JOUR
T1 - Compact bidding languages and supplier selection for markets with economies of scale and scope
AU - Bichler, Martin
AU - Schneider, Stefan
AU - Guler, Kemal
AU - Sayal, Mehmet
N1 - Funding Information:
This project is supported by the Deutsche Forschungsgemeinschaft (DFG) ( BI 1057/1-1 ).
PY - 2011/10/1
Y1 - 2011/10/1
N2 - Combinatorial auctions have been used in procurement markets with economies of scope. Preference elicitation is already a problem in single-unit combinatorial auctions, but it becomes prohibitive even for small instances of multi-unit combinatorial auctions, as suppliers cannot be expected to enumerate a sufficient number of bids that would allow an auctioneer to find the efficient allocation. Auction design for markets with economies of scale and scope are much less well understood. They require more compact and yet expressive bidding languages, and the supplier selection typically is a hard computational problem. In this paper, we propose a compact bidding language to express the characteristics of a supplier's cost function in markets with economies of scale and scope. Bidders in these auctions can specify various discounts and markups on overall spend on all items or selected item sets, and specify complex conditions for these pricing rules. We propose an optimization formulation to solve the resulting supplier selection problem and provide an extensive experimental evaluation. We also discuss the impact of different language features on the computational effort, on total spend, and the knowledge representation of the bids. Interestingly, while in most settings volume discount bids can lead to significant cost savings, some types of volume discount bids can be worse than split-award auctions in simple settings.
AB - Combinatorial auctions have been used in procurement markets with economies of scope. Preference elicitation is already a problem in single-unit combinatorial auctions, but it becomes prohibitive even for small instances of multi-unit combinatorial auctions, as suppliers cannot be expected to enumerate a sufficient number of bids that would allow an auctioneer to find the efficient allocation. Auction design for markets with economies of scale and scope are much less well understood. They require more compact and yet expressive bidding languages, and the supplier selection typically is a hard computational problem. In this paper, we propose a compact bidding language to express the characteristics of a supplier's cost function in markets with economies of scale and scope. Bidders in these auctions can specify various discounts and markups on overall spend on all items or selected item sets, and specify complex conditions for these pricing rules. We propose an optimization formulation to solve the resulting supplier selection problem and provide an extensive experimental evaluation. We also discuss the impact of different language features on the computational effort, on total spend, and the knowledge representation of the bids. Interestingly, while in most settings volume discount bids can lead to significant cost savings, some types of volume discount bids can be worse than split-award auctions in simple settings.
KW - Auctions/bidding
KW - Decision support systems
KW - E-commerce
UR - http://www.scopus.com/inward/record.url?scp=79958007068&partnerID=8YFLogxK
U2 - 10.1016/j.ejor.2011.03.048
DO - 10.1016/j.ejor.2011.03.048
M3 - Article
AN - SCOPUS:79958007068
SN - 0377-2217
VL - 214
SP - 67
EP - 77
JO - European Journal of Operational Research
JF - European Journal of Operational Research
IS - 1
ER -