Subsection 5.2.2 introduced negotiation support systems, which are used to support bilateral negotiations on multiple attributes. This section introduces multi-attribute auctions, a generalization of reverse auctions. Multiattribute (reverse) auctions combine the advantages of auctions, such as high efficiency and speed of convergence, and permit negotiation on multiple attributes with multiple suppliers in a procurement situation.

Multi-Attribute Procurement Negotiations

Several authors have analyzed tenders and reverse auctions (Dasgupta and Spulber, 1989; Laffont and Tirole, 1993). Previous game-theoretical models of reverse auctions have generally assumed that the qualitative attributes are fixed prior to competitive source selection – hence, bidding competition is restricted to the price dimension. While such an approach may be appropriate for auctions of homogeneous goods, this assumption does not necessarily apply to most procurement situations.

In reverse auctions, bidders often provide very different kinds of goods and services in their bids. An example is the procurement of large food retailers (Bichler, Kaukal and Segev, 1999). The suppliers in the market consist of large companies as well as a large number of small and mediumsized enterprises (SMEs) such as bakeries and breweries. The buyers are a small number of large food retailers who aggregate the demand and distribute it to the consumer.