An Empirical Study of Collusion Potential Metrics and their Impact on Online Reverse Auction Success

Abstract

This chapter studies the effect of bidder conduct on auction success by examining a business to business (B2B) online procurement auction market. In particular, it investigates if collaborative bidding is more likely when suppliers compete with each other on multiple auctions and/or over a longer period of time. Multiple regression analysis confirms that in online reverse auctions, winning bids are higher or auction success is lower when the same set of suppliers bid against each other regularly. In a supply chain framework, existence of such collaborative bidder behavior would reduce the cost savings for the buyer. It is therefore important for the practitioners to be alert to such activities and introduce measures that curtail the resulting costly outcomes.