Studies Of Reverse Auction Mechanism And It's Efficiency

Since China's entry into WTO, a global market has been formed and enterprises are encountering an ever-growing market competition. Capricious and fast-changing market demand and the shortening of production lifecycle have made enterprises'profit margin become narrower and narrower, which has forced them to seek ways to reduce their operation costs in various links. Therefore, procurement is becoming one of the important strategies of realizing the purposes of a company, and it can reduce the production costs and develop product quality and increase competence of a company. However, a number of domestic companies do not think so.In this paper, through literature review and by analyzing the advancement of science and technology, the growing abundance of material, and the transformation to the buyer's market that a corporation faces, the management of procurement is realized in three phases: 1) the purchasing management theory based on the repertory theory of the Economic Order Quantity, 2) the purchasing management based on the supply chain, and 3) that of the reverse auction procurement.The game theory is employed in this paper. First of all, the bidder valuation of the purchasing projects is independent of others, and it is differently distributed. We can establish a game model of the lowest price auction scheme which is comparatively optimal. Studying the strategy of bidder, finding the proposition of the relationship between the number of bidders and the strategy of bidding, we can draw a conclusion about the expected payoffs of the bidder. Under the incentive condition, what can be found is the optimal reserve price of the auctioneer. Furthermore, it is discovered that the bids of the suppliers are higher than their costs and the more bidders there are, the lower the bidding is.In the multidimensional attributes reverse auction, the dimensions are enlarged at random to natural numbers and the fuzzy evaluation is applied. It is designed that a mechanism of multidimensional procurement auction is based on the Fuzzy valuation of all attributes under the costs of suppliers and buyers'utility is discrete. The rights of every attribute are designed equivalent to the marginal average costs of their industry. It can be seen that the mechanism of the multidimensional attributes reverses the auction and the rights of every attribute designed equivalent to the marginal average costs of their industry are optimal. Through the fuzzy evaluation method, the reverse auction is changed to the"first-price sealed-bid"auction mechanism. The mechanism can realize the buyer's optimal expected income under the incentive condition, which has average marginal costs in its industry. In order to find the optimal solution in the multi-item reverse auction and realize the incentive condition, it is designed that a multi-item reverse auction mechanism minimizing the buyer's total procurement costs under the buyer is neutral risk and there are more large suppliers who have limited capacities and not every supplier's capacities is enough to meet the needs of the buyer's monopsony. The linear programming model based on the auction mechanism is established, and the suppliers'bidding strategy is argued. It is found that the auction mechanism minimizing buyer's total procurement cost is incentive compatibility. This mechanism is good for avoiding submitting the third party and the letting out of relevant information. Furthermore, the sorts and amount of goods are enlarged at random to natural numbers.Second, it is designed to find the different efficiency between the reverse auction mechanism and the negotiation mechanism so that guide for the purchasing practice is provided. We can compare the efficiency of the reverse auction mechanism with the negotiation mechanism in the case where the buyer has the dominant bargaining power under the asymmetric information about the cost of goods. Based on the models of the Chatterjee and Samuelson's negotiation game, we may limit the ranges of costs of suppliers and value of auctioneers to the same of Chatterjee and Samuelson's in the reverse auction game model. It is found that when there are more than two bidders, the reverse auction procurement is more efficient than the negotiation mechanism under the asymmetric information of the costs of suppliers and the value of auctioneers. The ranges of the procurement trade of the reverse procurement auction are wider than the negotiation mechanism. Furthermore, using reverse auction to purchase materials and spare parts can decrease the costs of the company. In the reverse auction procurement, the more suppliers there are, the more decrease the supplier would bid over the cost, and the lower the supplier bids. The efficiency of the reverse auction mechanism comes from the competitive bidding in the suppliers.Third, Bidder collusion may be detrimental for both social efficiency and auctioneer's revenue. In order to realize the efficiency of procurement auction mechanism and increase the welfare of society, we have designed beforehand the auction in the strong cartel before the public auction that Robinson advanced in 1985. We study in depth the first-price and second-price collusion mechanism in strong cartel before the public auction that Mcafee, Mcmillan and Wangyan have advanced. Furthermore, we will discuss the strategies of the cartel's representatives taking part in the public auction when the members of cartel are fewer than or equal to the total bidders. We establish a model to study the features of strong cartel that has side-payment to all losing bidders. It is found that the members of cartel do not report their true evaluation about the item in the second-price collusion scheme and in the first-price collusion scheme. Furthermore, the second-price auction is better for cartel collusion than the first-price auction. In the public auction, the number of cartel members equal to the total bidders who keep reserve price secret in first-price sealed bid auction dominates strategically for the auctioneer. When the number of cartel members is fewer than the total bidders, the collusion between the bidders is not efficient.Lastly, we have also employed all areas'panel data in our mainland from 1997 to 2002 to validate the conclusion of the reverse auction that could decrease the costs of procurement for the buyer using EVIEWS 5.1. The changing quantity of every acreage costs in every area's road construction is designed to duality variable of 0 and 1, we select binary choice Logit model to regress the relationship between the changing quantity of every cost and the reverse auction and efficiency of labor and technique development and capital asserts investment index. It is found that the procurement auction could notably affect the average cost of road construction. It is concluded that through the reform of the system, the continuous expansion of finance of our nation will not only expand inner demands and promote economic development rapidly in terms of amount and scales, but also remarkably reduce the average cost of road construction and increase the benefits of investment and realize the transformation of economic mode of development.