Decision-Making Elements for the Design of Emerging Multi-Dimensional Auctions

Decision-Making Elements for the Design of Emerging Multi-Dimensional Auctions

Charis A. Marentakis, Dimitrios M. Emiris
DOI: 10.4018/joris.2010100104
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Auctions have known considerable and continuous growth during the past decades due to their logic and efficiency in price formation when the value of goods traded is not known or varies. Although earlier research has been based mainly on Microeconomics and Games Theory, recent advances extended relevant research in Operational Research and Information Technology. Today, auctions and their applications form a challenging topic not only for economists but for operational researchers, marketers, logisticians and management engineers. This paper examines contemporary emerging auction formats, including auctions in which bids consist of many other parameters. The study of these emerging auction formats proceeds through the analysis of critical auction parameters that directly affect the decision-making process and the problems that auction participants face. This paper presents, with a presentation in graphical form, the decision framework for the majority of approaches presented in contemporary literature to highlight the association between decision elements and auction design.
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An Overview Of Auctions

The main participants and decision makers in any auction are the buyer(s), the seller(s) and the auctioneer; the latter is typically an independent entity. Buyers and sellers, depending on the environment an auction is conducted, may either have the role of an initiator (the one who initiates the auction in order to buy or sell a good) or that of a bidder (the one who makes an offer). In the so-called forward auctions, the seller acts as the initiator while a buyer is the bidder; in reverse auctions in the contrary, a buyer acts as the initiator while a seller is the bidder.

Auctions may be distinguished between single-good and combinatorial auctions, depending on the nature of the object of trade. An auction is called a single-good auction if the object of the trade is of the same type. An auction is called combinatorial if the object of the trade concerns (positively or negatively) inter-related goods of different types, characteristics or functionalities. In both cases, the number of units for the good(s) under auction helps in characterizing the auction as single-unit or multi-unit.

Auctions may further be distinguished between single-attribute and multi-attribute auctions, depending on the number of attributes (or criteria) used for the evaluation of a bid. In single-attribute auctions, a unique criterion is used to evaluate the bid; typically, this criterion is the bid price. In multi-attribute auctions, on the other hand, several criteria may be used for the evaluation of the bid, which are often combined to produce a value for the bid.

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