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Pricing in multiple-item procurement auctions with a common to all items fixed cost

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  • Lorentziadis, Panos L.

Abstract

In a sealed bid multiple-item procurement auction, bidders may incur a fixed cost, which is common to all items. The paper develops pricing methods which ensure that a preset percentage profit level is always realized and the fixed cost is completely recovered, even if the eventual order is for some of the items at reduced quantities. One approach sets constraints and determines acceptable orders. Another alternative is to provide appropriate discounts. Finally, a third method considers fixed prices and imposes constraints that address the exposure problem of recovering the fixed cost. These methods may also be used for pricing combinatorial auctions.

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  • Lorentziadis, Panos L., 2008. "Pricing in multiple-item procurement auctions with a common to all items fixed cost," European Journal of Operational Research, Elsevier, vol. 190(3), pages 790-797, November.
    • Handle: RePEc:eee:ejores:v:190:y:2008:i:3:p:790-797
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    References listed on IDEAS

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    1. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    2. Kokott, Gian-Marco & Bichler, Martin & Paulsen, Per, 2019. "The beauty of Dutch: Ex-post split-award auctions in procurement markets with diseconomies of scale," European Journal of Operational Research, Elsevier, vol. 278(1), pages 202-210.

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