Design of combinatorial auctions for allocation and procurement processes

Abstract

The application of combinatorial auctions in procurement and allocation processes can help to achieve higher efficiency by taking the substitutionalities and complementarities of bundled goods valuation into consideration. The article describes criteria for the analysis, conceptualization and modeling of Web-based combinatorial procurement and allocation systems. The foundations of combinatorial auctions are illustrated, followed by a view on several procedural variants. A number of obstacles such as design and usage complexity which eliminate the advantages of the combinatorial auction (allocation efficiency, transaction cost savings, and fairness) are then discussed. Based on these insights a draft of a comprehensive decision framework for application-oriented combinatorial auctions is given in the third part. Auction designs developed within the presented decision framework have to be evaluated before going into industry deployment. The article therefore closes with a process model for the experimental and simulative verification of the planned auction design.