OPERATIONAL RESEARCH SOCIETY OF NEW ZEALAND
Operational Research Society of New Zealand & Engineering Science Department
School of Engineering
University of Auckland
Friday October 19th, 2:00 pm
An Auction Mechanism to Support a Multi-attribute eRFQ Process
Lawrence M. Wein, Sloan School of Management, MIT
We consider a manufacturer who uses a reverse, or procurement, auction to determine which supplier will be awarded a contract. Each bid consists of a price and a set of non-price attributes (e.g., quality, lead time). The manufacturer is assumed to know the parametric form of the suppliers’ cost functions (in terms of the non-price attributes), but has no prior information on the parameter values. We construct a multi-round open-ascending auction mechanism, where the manufacturer announces a slightly different scoring rule (i.e., a function that ranks the bids in terms of the price and non-price attributes) in each round. Via inverse optimization, the manufacturer uses the bids from the first several rounds to learn the suppliers’ cost functions, and then in the final round chooses a scoring function that attempts to maximize his utility. Under the assumption that suppliers submit their myopic best-response bids in the last round, and do not distort their bids in the earlier rounds (i.e., they choose their minimum-cost bid to achieve any given score), our mechanism indeed maximizes the manufacturer’s utility within the open-ascending format. We also discuss several enhancements that improve the robustness of our mechanism with respect to the model’s informational and behavioral assumptions. Time permitting, the final portion of the talk will briefly discuss the revenue management of a make-to-stock queue.
Lawrence M. Wein holds the DEC Leaders for Manufacturing Professorship of Management Science at MIT’s Sloan School of Management. He received a Ph.D. in Operations Research from Stanford University in 1988. His primary research interests are manufacturing and medicine. He is currently the Editor-in-Chief of Operations Research. Professor Wein is visiting Auckland as a 2001 ORSNZ Visiting Lecturer. His lecture on Friday will be followed by refreshments in the Engineering Staff common room on the 12th floor of the School of Engineering.
Auckland Branch Social and Seminar: November 29 2000