Combinatorial Group-Buying double auction for recycled remanufacturing products of construction waste

Abstract

Digital trading plays a crucial role in construction waste resource utilization. However, supply–demand imbalance and inefficient pricing exist under a prevalent negotiation-based trading approach and a fixed price mechanism, resulting in high transaction costs and rigid clearing prices. Furthermore, high ask prices restrict the transaction scale of recycled remanufacturing products of construction waste (RRPCW). These deficiencies severely hinder development of RRPCW digital trading market. Motivated by the successful implementation of group-buying in various industries, this article aims to propose a combinatorial group-buying double auction mechanism to deal with the challenges in RRPCW transactions. A combinatorial double auction is firstly established where buyers are allowed to bid on bundles of RRPCW to satisfy their full set of procurement requirements. To further scale up transactions, group-buying is incorporated into the auction, where sellers provide corresponding discounts to their matched buyers when thresholds are reached. Such an approach can effectively leverage buyers’ collective purchasing power and scale effect to lower the purchasing costs. The winner determination problem is solved with a bid density-based scheme, while buyers’ payments and sellers’ revenues are calculated by a critical value-based scheme. Theoretical analysis manifests that the designed mechanism can realize individual rationality, strong budget balance and incentive-compatibility of buyers. Five sensitivity analyses including buyers’ bid prices, threshold levels, discount degrees, seller supply heterogeneity, and buyer demand distribution on the mechanism’s overall performance are examined. Additionally, the results of comparative analysis among the proposed mechanism, its counterparts and the fixed price mechanism under different market conditions demonstrate the superiority of our new designed mechanism. Finally, managerial implications are summarized based on the stakeholders’ multi-dimension perspectives. Especially, we emphasized that the regulatory role of the platform is vital for the sustainable and healthy development in the construction waste trading industry.