An asymmetric multi-item auction with quantity discounts applied to Internet service procurement in Buenos Aires public schools

An asymmetric multi-item auction with quantity discounts applied to Internet service procurement in Buenos Aires public schools

This article studies a multi-item auction characterized by asymmetric bidders and quantity discounts. We report a practical application of this type of auction in the procurement of Internet services to the 709 public schools of Buenos Aires. The asymmetry in this application is due to firms’ existi...

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Bibliographic Details
Published in:Annals of operations research Vol. 258; no. 2; pp. 569 - 585
Main Authors: Bonomo, F., Catalán, J., Durán, G., Epstein, R., Guajardo, M., Jawtuschenko, A., Marenco, J.
Format: Journal Article
Language:English
Published: New York Springer US 01-11-2017
Springer
Springer Nature B.V
Subjects:
Asymmetry
Auctions
Bids
Business and Management
Combinatorics
Competition
Discounts
Integer programming
Internet
Internet access
Intersections
Linear programming
Management
Operations research
Operations Research/Decision Theory
Polynomials
Procurement
Public schools
S.i. : Claio 2014
Studies
Technology application
Theory of Computation
Argentina
Buenos Aires Argentina
Integer linear programming
Multi-item auction
Asymmetric bidders
Quantity discounts
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Summary:This article studies a multi-item auction characterized by asymmetric bidders and quantity discounts. We report a practical application of this type of auction in the procurement of Internet services to the 709 public schools of Buenos Aires. The asymmetry in this application is due to firms’ existing technology infrastructures, which affect their ability to provide the service in certain areas of the city. A single round first-price sealed-bid auction, it required each participating firm to bid a supply curve specifying a price on predetermined graduated quantity intervals and to identify the individual schools it would supply. The maximal intersections of the sets of schools each participant has bid on define regions we call competition units. A single unit price must be quoted for all schools supplied within the same quantity interval, so that firms cannot bid a high price where competition is weak and a lower one where it is strong. Quantity discounts are allowed so that the bids can reflect returns-to-scale of the suppliers and the auctioneer may benefit of awarding bundles of units instead of separate units. The winner determination problem in this auction poses a challenge to the auctioneer. We present an exponential formulation and a polynomial formulation for this problem, both based on integer linear programming. The polynomial formulation proves to find the optimal set of bids in a matter of seconds. Results of the real-world implementation are reported.
ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-016-2164-x