Multi-attribute Procurement Auction In The Presence Of Supply Disruption Risk

With the development of the global economy,more and more firms are buying and selling goods in the global market.Recently,the outsourcing strategy has been widely adopted by companies,which leads to information asymmetry between companies.As a result,it also increases the complexity of the supply chain and makes it more difficult for the supply chain management.On the other hand,millions of materials and service have been traded by reverse auction,however,the disruption risk is neglected by most auctioneers.Besides,a lot of empirical and laboratory evidence shows that managers are overconfident when making decisions.It's not abnormal for them to overestimate their judgment.Based on these facts,we considered the disruption risk in the reverse auction.We analyzed the impact of disruption risk on the suppliers' bidding strategy and the expected revenue of both buyer and suppliers.Based on the results,we further explored the influence of overconfidence in the reverse auction in the presence of disruption risk.First,we studied the price only reverse auction considering the disruption risk.We analyzed the bidding strategy of suppliers in the first-price and second-price auction when facing potential disruption risk.We also analyzed the expected revenue of suppliers and the buyer.The results show that the bidding strategy of suppliers depends on the virtual cost,including the producing cost and the penalty paid to the buyer when failing to deliver the product.We demonstrated that the two auction formats are equivalent respect to the expected revenue.We further investigated the sufficient condition to guarantee the social efficiency of the two auctions.Second,we considered the situation when suppliers are required to submit both price and its success probability.The suppliers'costs are related to the success probability they choose.In this case,we first analyzed the winner determinant problem when all suppliers'success probabilities are known to all.The results show that there is essential difference between disruption risk and other non-price attributes of suppliers,which makes previous results of multi-attribute auction not valid in this case.Then we proposed the VCG-DR mechanism to help the buyer to choose the right supplier(s).We showed that the mechanism is incentive compatible and efficient.Numerical results show that our mechanism outperforms the popular SA-MFV mechanism.We focused on the impact of overconfidence on the reverse auction with disruption risk.We studied the bidding strategy of suppliers in the first-score and second-score auctions,the results indicate that the two auctions maintain the revenue equivalence principle,optimality,and efficiency.Based on these results,we studied the two kinds of overconfidence,over-estimation and over-placement,in the reverse auction.The results show that the two kinds of overconfidence have a different influence on suppliers'bidding strategy and the expected revenue of both sides.The overestimation makes the supplier more aggressive in the two auctions while the over-placement makes the supplier less aggressive in the first-score auction.The over-placement has no impact on the second-score auction.In addition,the over-estimation will not affect the revenue equivalence principle and the optimality of the two auctions,while over-placement does.On the contrary,the over-placement has no impact on the social efficiency of the two auctions while the over-estimation does.Our work has the following contributions compared with previous literature:Firstly,this thesis considered the asymmetric information of disruption risk management.In previous works,most researches assume that the probability of disruption is known to the buyer,while this might not be satisfied in many cases.To consider the asymmetry of the disruption risk information is important.Secondly,we considered the disruption risk in the reverse auction.Disruption will cause great loss to buyers if it's been neglected in the reverse auction.Besides,the disruption risk is quite different from other non-price attributes of suppliers.Our work could enrich this research field.Thirdly,we analyzed the properties of different auction mechanism in the presence of the disruption risk.Our work could give theoretical advice to auctioneers when dealing with such problems.Finally,we investigated the overconfidence in the operational management field.A lot of evidence shows that managers are overconfident,however,most operational researches are based on the rationality of people.This may lead to biased behavioral in the decision.Therefore,to consider the behavior of decision makers in the operational research is necessary and very important.Our work could provide better decision suggestions to managers.