Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

A Multi-Attribute Auction Mechanism Based on Conditional Constraints and Conditional Qualitative Preferences

Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

A Multi-Attribute Auction Mechanism Based on Conditional Constraints and Conditional Qualitative Preferences

Article excerpt

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1 Introduction

In this section we first highlight the benefits of reverse and multi-attribute auctions. Then we present the motivations of our research work and its valuable contributions.

1.1 Scope

Over the past decade, a considerable number of procurement departments from different domains of industry embraced online reverse auctions [8], [30], [53]. In addition, numerous providers of reverse auction services are available, including Priceline, Bidz, AuctionAnything, Freemarkets, eBreviate, FrictionLess and Procuri. Reverse eauctions are becoming very widespread in both small and large organizations because they offer significant advantages, such as an easier access to global and qualified suppliers, a better trading and market transparency, a lower purchasing cost, access to more variety of products, and an increased efficiency [6] , [30], [44]. For instance, a survey reports that corporate buyers in reverse auctions achieved 15% in cost savings and up to 90% in time reduction of the purchasing process [48]. This latter is generally completed in three to eight hours [30]. So both buyers and suppliers will reach their needs in a shorter time. According to [45], the price of the products can be reduced by as much as 20%, and by an average of 5% to 12%. This is the major factor attracting purchasing companies to reverse auctions [45]. On the sellers' side, online reverse auctions create larger client bases, secure new businesses, lower production costs, reduce excess inventories, and improve sales [44], [53].

Nowadays, there is a great demand to process multi-attribute contracts since real-world procurement scenarios, such as in business-to-business sector, are complex and involve multiple dimensions of the items (goods or services), [29]. Multi-attribute auctions are one of the most valuable procurement mechanisms [46]. In our research work, we focus on Multi-Attribute Reverse Auctions (that we call MARAs) for single-unit procurements. MARAs allow negotiation over the price along with other attributes, e.g. warranty, quality grade, payment and delivery terms for goods; response time, security and usability for service providers. We may note that multi-unit auctions can be represented with single-unit auctions where the quantity of items is specified as an attribute [49]. It has been shown that under the assumption that the buyer's utility function and the scoring rule are the same, MARAs produce much higher profits for buyers and sellers than traditional price-only auctions because MARAs offer more bidding flexibility [7], [8]. This auction type is becoming essential in e-commerce as a large number of modern day enterprises are developing their markets using e-procurement in order to cut on costs [55]. In 2011, e-procurement market achieved $5 billion with an annual prediction rate of 8% to 12% [4].

1.2 Motivations

Auctions are the most studied economic mechanisms because they are complex and of "considerable empirical significance" [54]. In this paper, we focus on the buyer and our design goal is to optimize his expected payoff. Auction mechanisms differ in terms of preference representation (through utility functions), preference revelation (truthful or not, full or partial), state of the competition (current best bid, ranking of bids, scores of bids, etc.), allocation and payment rules, bidding strategies, bid increment, and winner determination (additive or quasi-additive aggregation models, Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) [5], [7], [14], [47], [54], [55]. A fundamental concern in MARAs is how to obtain a useful description of the items, especially when they are complex and multidimensional. [50] evaluates several industrial organizations and identifies conditions that are vital for the success of reverse auctions, including: a proper specification of the auctioned items, a strong competition among suppliers, and procurement of complex and strategic items. …

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