Factors Of Price Formation In Online Reverse Auctions

As a kind of e-procurement mode, online reverse auctions actualize real-time bid price. This mechanism is that a buyer offers a tender or contract for the supply of specific products or services and suppliers compete for the right to the contract by bidding reducing prices, until a final price—the lowest— brings the auction to an end. Online reverse auctions improve procurement efficiency greatly, reduce purchase cost and it is the resources solution mechanism by price competition.Within the B2B sector, many companies have recognized the opportunity to focus on cost reduction opportunities, in particular through the use of e-Procurement mechanisms. This thesis analyzes the benchmark model of reverse auctions theory, the applicability, actualization conditions and implementation of online reverse auctions, reveals two bidding information functions that level of cost saving and finding of average cost interval, further analyzes the three aspects of factors that influence price formation in online reverse auctions— the buyer's and suppliers' behavior, the characters of products and the market environment.Base on the analysis and empirical study of 225 online reverse auction, the results indicate as follows: "late bidding" is remarkable in open online reverse auctions and it's a ascendant strategy for suppliers; MRO purchases are more likely to move into online reverse auctions and the cost savings in MRO is more significant; there is a negative relationship between the quantity of products for purchase and auction success; the buyer's market power is significant to price formation in online reverse auctions.