A Multi-attribute Combinatorial Auction Approach to Electronic Procurement Mechanism Design

This article focuses on mechanism design in public procurement settings involving combinatorial auctions. An important difference between combinatorial and forward auctions for procurement is that multiple attributes of the items for sale must be represented, since buying is more complicated than selling. We propose a new mechanism for multi-attribute combinatorial procurement auctions by revising mechanisms associated with the past proposals of Groves and Clark that are specifically designed to deal with the issue of social welfare maximization in the public procurement setting. Our multi-attribute Vickrey-GrovesClarke (MA-VCG) mechanism is incentive-compatible, provides constraints on partial participation, is budget-balanced, and also is efficient in quasi-linear preferences. In consideration of the profit perspective of the auctioneer, we also propose a payment function to implement the goal of achieving minimal costs for the government auctioneer, and appropriate benefits for participating suppliers. We also provide a brief numerical illustration of our MA-VCG mechanism in action, as well as consideration of its limitations.