Bidder behaviors in repeated B2B procurement auctions

• Main Authors: PARK, Jong Han, LEE, Jae Kyu, LAU, Hoong Chuin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Repeated bidding; repeated bidder; procurement auctions; bid pricing behavior; Artificial Intelligence and Robotics; E-Commerce; Operations Research, Systems Engineering and Industrial Engineering
• Online Access: https://ink.library.smu.edu.sg/sis_research/1615; https://ink.library.smu.edu.sg/context/sis_research/article/2614/viewcontent/p145_park_BidderBehavB2B_2012.pdf
• Institution: Singapore Management University

B2B auctions play a key role in a firm's procurement process. Even though it is known that repetition is a key characteristic of procurement auctions, traditional auctioneers typically have not put in place a suitable mechanism that supports repetitive auctions effectively. In this paper, we empirically investigate what has taken place in repeated procurement auctions based on real world data from a major outsourcing company of MRO (Maintenance, Repair and Operations) items in Korea. From this empirical study, we discovered the followings. First, we discovered that the repeated bidders contribute majority of all bids, and that the number of new entrants declined significantly as time passes. Second, repeated bidders become inactive and virtually leave the market, particularly if they fail to win in the auctions even though their bid prices were competitive. This implies that repeated bidders with lower winning rates have a higher possibility of becoming inactive. Third, the number of bidders along with the purchase amount and the bidder's previous winning rates are critical factors in determining both the winning bid price in the auction level and the bid price of each bidder. According to these research findings, we recognize that retaining a sufficient number of repeated bidders is crucial in the repeated procurement auction market. This motivates auctioneers to provide incentives to the repeated bidders to retain them in future auctions.