Multiattribute Auctions in Electronic Procurement

of doctoral dissertation accepted by the School of Economics and Business Engineering (http://www.wiwi.uni-karlsruhe.de) Universität Karlsruhe (TH), Germany (http://www.uni-karlsruhe.de) Date of defense: June 23, 2004 Multiattribute auctions provide a buyer with “the ability to retain flexibility during negotiation, and to express tradeoffs across different outcomes without making an up-front commitment to a particular combination of attributes” (Sunderam & Parkes 2002), since the final characteristics of the item, as well as its price, are determined dynamically through suppliers’ bids (Parkes & Kalagnanam 2002). On the other hand, multiattribute auctions allow suppliers to differentiate in the auction process and to bid on their competitive advantages, e. g. offer a faster delivery if production capacity is available (Wise & Morrison 2000). Applying multiattribute auctions to request for quotes (RFQ) procurement processes is expected to lead to a substantial monetary impact for both the buying organization and the participating suppliers (Beil & Wein 2003): Multiattribute auctions render it possible to negotiate integratively, i.e., they allow bidders to submit bids which make both the buyer and the bidding supplier better off (create a win-win situation), whereas price auctions are strictly distributive, i. e., the supplier can only make himself better off at the expense of the buyer (a win-lose situation) and vice versa. By enabling integrative negotiation moves, multiattribute auctions can create and capture value “left on the table” in price auctions (Kersten, Noronha & Teich 1999). Multiattribute auctions thus hold the potential to increase the overall value of a trade compared to price auctions and to increase the process efficiency relative to manual RFQ processes, e. g., by decreasing administrative and process cost (Koppius 2002; Teich, Wallenius, Wallenius & Koppius 2003). Multiattribute auctions have received attention in business practice, been subject to speculation in industry publications and are an active research area in several scientific fields.