Procurement Sales with (Homogeneous and) Heterogeneous Goods

Abstract

Multi-sourcing is a common procurement practice, especially for key products with low total costs because of risk considerations. In this context often split award auctions are applied. We develop two different descending split award auctions where the auctioneer buys a bundle of four different products. Each of the items is bought through two lots each with different sizes to different bidders. Firstly, we set up these auction formats in an iterative setting and find that the communication complexity differs significantly. One format is the Reverse Combinatorial Clock (RCC) auction. Combinatorial auctions have been suggested as a mean to raise efficiency in multi-item negotiations with complementarities among goods as they can be found in procurement, energy markets, transportation and the sale of spectrum auctions. The second format is the simultaneous Yankee auction (SY) which is a variation of the simultaneous multi-round auction (SMRA). We perform simulations in different treatments and find out that the RCC results in a better efficiency and auctioneer costs in most cases, especially using a combination of straight forward and power set bidding strategies. We conclude, that even in environments with complementarities an efficient bidding language using the right auction format and rules, as the configuration of our SY auction, can result in almost as efficient outcomes as a combinatorial auction with the advantage of being computational tractable.