Hazard Analysis of Bidder Collusion in Reverse Auctions Based on Petri Nets

Xiaodan Zhang,Ivan Ka Wai Lai,Jin Fu,Huajun Tang

doi:10.1109/access.2020.2989346

Abstract

Bidder collusion in reverse auctions is a pervasive phenomenon that leads to a series of problems for buyers and their supply chains. This work aims to conduct a hazard analysis on a first-price sealed-bid reverse auction with bidder collusion by applying colored timed Petri nets, in which places and transition nodes represent bidding resources and activities. This work successfully dissects the collusion process, quantifies the harm of collusion, and compares the harm levels. The results of the simulation disclose two main causal factors for bidder collusion information asymmetry and strong relationship between strong bidders. This study also identifies the situations where there is a strong relationship between strong bidders. Based on these findings, several recommendations are proposed to reduce the harm of the ring game in a real reverse auction process. Thus, this study helps the buyers to take control of reverse auctions.

Highlights

Reverse auctions have become an effective and efficient way for buyers to reduce the purchase price, increase market efficiency, access a large-base of suppliers, and increase the efficiency of the procurement process [1]
PETRI NET MODEL OF A STATIC SEALED-BID REVERSE AUCTION In this study, a colored timed Petri nets (CTPNs) model is constructed that involves a set of concurrent processes formed by a number of temporally related tasks, which are executable by bidders and bundled bidding data
This study develops a CTPN model and successfully demonstrates how to use CTPNs to simulate six situations of a first-price sealed-bid reverse auction

Summary

INTRODUCTION

Reverse auctions have become an effective and efficient way for buyers to reduce the purchase price, increase market efficiency, access a large-base of suppliers, and increase the efficiency of the procurement process [1]. D. PETRI NET MODEL OF A STATIC SEALED-BID REVERSE AUCTION In this study, a CTPN model is constructed that involves a set of concurrent processes formed by a number of temporally related tasks, which are executable by bidders and bundled bidding data. When strong bidders excluding the proponent receive the invitation of a ring game, they will compare the collusion effect on their profit If they vote ‘yes,’ they will bid consistently with the cartel rule (e.g. Xc > Xh ) to ensure that the designated bidder can win the contract. The harm level is the value of CDR minus CDRc. Relatively new sets denoted by Xc, NPVc, B, profit, agree, and CDRc represent the set under collusion of the bid price, net present price, current share, profit, vote for agreement of ring membership based on the collusion sub-model, and cost-down range performance under collusion. Analysis of every case with collusion is described in detail in Table 12, based on the same initial parameters and changed information

A HIERARCHICAL PETRI NET MODEL FOR COMPARISON

Findings

CONCLUSION