Do Auction Parameters Affect Buyer Surplus in E-Auctions for Procurement?

Mithas, S., and Jones, J.L., 'Do Auction Parameters Affect Buyer Surplus in E-Auctions for Procurement?,' Production and Operations Management, pp. 455-470, 2007

16 Pages Posted: 11 Oct 2007

See all articles by Sunil Mithas

Sunil Mithas

University of Maryland - Robert H. Smith School of Business

Joni Jones

University of South Florida - College of Business Administration

Abstract

Although the initial euphoria about Internet-enabled reverse auctions has given way to a cautious but widespread use of reverse auctions in business-to-business (B2B) procurement, there is a limited understanding of the effect of auction design parameters on buyer surplus. In this paper, we study the effect of bidding competition, information asymmetry, reserve price, bid decrement, auction duration, and bidder type on buyer surplus. We collected field data on more than 700 online procurement auctions conducted by a leading auctioneer and involving procurement items worth millions of dollars. Consistent with the predictions of auction theory, the results indicate that bidding competition, reserve price, and information sharing affect buyer surplus. Unlike previous findings in the consumer-to-consumer context, we find that bid decrement and auction duration have no effect in B2B procurement auctions. Our results suggest that use of the rank-bidding format increases buyer surplus when incumbent suppliers participate in the auction. We discuss the theoretical and managerial implications of these findings for future research and for optimal design of online procurement auctions.

Keywords: Business Value of Information Technology, Supply Chain Management, Buyer Surplus, Reverse Auctions, Internet-enabled Procurement Auctions

JEL Classification: C93, M1, L22

Suggested Citation

Mithas, Sunil and Jones, Joni, Do Auction Parameters Affect Buyer Surplus in E-Auctions for Procurement?. Mithas, S., and Jones, J.L., 'Do Auction Parameters Affect Buyer Surplus in E-Auctions for Procurement?,' Production and Operations Management, pp. 455-470, 2007. Available at SSRN: https://ssrn.com/abstract=901678

Sunil Mithas (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

​Van Munching Hall
7699 Mowatt Ln
College Park, MD 20742-1815
United States

HOME PAGE: http://sunilmithas.com/

Joni Jones

University of South Florida - College of Business Administration ( email )

4202 E. Fowler Avenue, BSN 3403
Tampa, FL 33620-5500
United States

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