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Procurement Auctions with Best and Final Offers
Conference proceeding   Open access

Procurement Auctions with Best and Final Offers

Vasilis Gkatzelis, Randolph Preston McAfee and Renato Paes Leme
Proceedings of the ACM on Web Conference 2025, pp 3335-3343
28 Apr 2025
DOI: https://doi.org/10.1145/3696410.3714709
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https://doi.org/10.1145/3696410.3714709View
Published, Version of Record (VoR)Open Access via Drexel Libraries Read and Publish Program 2025CC BY V4.0,  Open

Abstract

Information systems -- World Wide Web -- Web applications -- Electronic commerce -- Online auctions Theory of computation -- Theory and algorithms for application domains -- Algorithmic game theory and mechanism design -- Algorithmic mechanism design Theory of computation -- Theory and algorithms for application domains -- Algorithmic game theory and mechanism design -- Computational pricing and auctions
We study sequential procurement auctions where the sellers are provided with a ''best and final offer'' (BAFO) strategy. This strategy allows each seller i to effectively ''freeze'' their price while remaining active in the auction, and it signals to the buyer, as well as all other sellers, that seller i would reject any price lower than that. This is in contrast to prior work, e.g., on descending auctions, where the options provided to each seller are to either accept a price reduction or reject it and drop out. As a result, the auctions that we consider induce different extensive form games and our goal is to study the subgame perfect equilibria of these games. We focus on settings involving multiple sellers who have full information regarding each other's cost (i.e., the minimum price that they can accept) and a single buyer (the auctioneer) who has no information regarding these costs. Our main result shows that the auctions enhanced with the BAFO strategy can guarantee efficiency in every subgame perfect equilibrium, even if the buyer's valuation function is an arbitrary monotone function. This is in contrast to prior work which required that the buyer's valuation satisfies restrictive properties, like gross substitutes, to achieve efficiency. We then also briefly analyze the seller's cost in the subgame perfect equilibria of these auctions and we show that even if the auctions all return the same outcome, the cost that they induce for the buyer can vary significantly.

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Collaboration types
Industry collaboration
Domestic collaboration
Web of Science research areas
Computer Science, Interdisciplinary Applications
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