Short Communication

DEA Based Auctions Simulations

Athanasios Papakonstantinou, Peter Bogetoft

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

In this paper we use simulations to numerically evaluate the Hybrid DEA - Second Score Auction. In a procurement setting, the winner of the Hybrid auction by design receives payment at the most equal to the Second Score auction. It is therefore superior to the traditional Second Score scheme from the point of view of a principal interested in acquiring an item at the minimum price without losing in quality. For a set of parameters we quantify the size of the improvements and show that the improvement depends intimately on the regularity imposed on the underlying cost function. In the least structured case of a variable returns to scale technology, the hybrid auction only improved the outcome for a small percentage of cases. For other technologies with constant returns to scale, the gains are considerably higher and payments are lowered in a large percentage of cases. We also show that the number of the participating agents, the concavity of the principal value functions, and the number of quality dimensions impact the expected payment. © 2013 Elsevier B.V. All rights reserved.
Original languageEnglish
JournalEuropean Journal of Operational Research
Volume231
Issue number2
Pages (from-to)507-511
ISSN0377-2217
DOIs
Publication statusPublished - Dec 2013

Cite this

Papakonstantinou, Athanasios ; Bogetoft, Peter. / Short Communication : DEA Based Auctions Simulations . In: European Journal of Operational Research. 2013 ; Vol. 231, No. 2. pp. 507-511.
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title = "Short Communication: DEA Based Auctions Simulations",
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Short Communication : DEA Based Auctions Simulations . / Papakonstantinou, Athanasios; Bogetoft, Peter.

In: European Journal of Operational Research, Vol. 231, No. 2, 12.2013, p. 507-511.

Research output: Contribution to journalJournal articleResearchpeer-review

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AB - In this paper we use simulations to numerically evaluate the Hybrid DEA - Second Score Auction. In a procurement setting, the winner of the Hybrid auction by design receives payment at the most equal to the Second Score auction. It is therefore superior to the traditional Second Score scheme from the point of view of a principal interested in acquiring an item at the minimum price without losing in quality. For a set of parameters we quantify the size of the improvements and show that the improvement depends intimately on the regularity imposed on the underlying cost function. In the least structured case of a variable returns to scale technology, the hybrid auction only improved the outcome for a small percentage of cases. For other technologies with constant returns to scale, the gains are considerably higher and payments are lowered in a large percentage of cases. We also show that the number of the participating agents, the concavity of the principal value functions, and the number of quality dimensions impact the expected payment. © 2013 Elsevier B.V. All rights reserved.

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KW - Multi-dimensional auctions

KW - Second score auction

KW - Yardstick competition

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