Designing multi-attribute auctions for engineering services procurement in new product development in the automotive context

G. Perrone, P. Roma and G. Lo Nigro

International Journal of Production Economics, 2010, vol. 124, issue 1, 20-31

Abstract: In recent years, use of multi-attribute auctions has been consolidating as a powerful mechanism in procurement settings where multiple drivers affect the transaction outcome. This paper provides a project management approach for multi-attribute auction design for standardized engineering services procurement in the context of new product development in automotive industry. Two variables are taken into account in the bidding process: price and duration of the given engineering activity. From a theoretical viewpoint, we fully determine optimal suppliers' bidding strategies and expected outcomes, i.e. score/utility, price and duration, for the buyer under both first score sealed bid and second score sealed bid auctions. We show that this two schemes are equivalent in terms of score/utility even in presence of multi-dimensional suppliers' private information. Therefore, they could be used interchangeably. Under a specific score function, we also perform a simulation showing that: (i) auction expected outcomes for the Main Contractor are very sensitive when duration reduction is a critical issue and (ii) number of bidders affects score and price but not duration.

Keywords: Collaborative; product; development; Automotive; engineering; Auction; design; Project; management (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:124:y:2010:i:1:p:20-31

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