Electronic sourcing with multi-attribute auctions

Abstract

Multi-attribute reverse auctions have been proposed as market institutions for electronic request for quotation buying processes. The choice of a multi-attribute auction institution for corporate sourcing is a challenge for the auctioneer in terms of utility maximization and allocational efficiency. The authors report on a computer based laboratory experiment in a sole sourcing scenario of a single, indivisible object and investigate whether a multi-attribute reverse English and a multi-attribute reverse Vickrey auction institution lead to identical outcomes with respect to the buyer's utility, suppliers' profits and allocational efficiency. The results show no significant difference in suppliers' profits. However, the English auction institution leads to both higher allocational efficiency and buyer's utility and is thus recommendable to corporate buyers. The documented breakdown of the outcome equivalence of the two auction institutions is attributed to bidders deviating from the dominant bidding strategy. The deviations are analyzed and explained by learning effects.