Title: Optimal auctions for multi-unit procurement with volume discount bids

Authors: Raghav Kumar Gautam, N. Hemachandra, Y. Narahari, Hastagiri Prakash, Devadatta Kulkarni, Jeffrey D. Tew

Addresses: Department of Computer Science and Automation, Indian Institute of Science, Bangalore, India. ' Industrial Engineering and Operations Research, Indian Institute of Technology Bombay, Mumbai, India. ' Department of Computer Science and Automation, Indian Institute of Science, Bangalore, India. ' Department of Computer Science and Automation, Indian Institute of Science, Bangalore, India. ' GM R&D Center, Warren, Michigan, USA. ' GM R&D Center, Warren, Michigan, USA

Abstract: In this paper, we design an optimal procurement mechanism for procuring multiple units of a single homogeneous item based on volume discount bids submitted by rational and intelligent suppliers. We develop an elegant auction mechanism, VD-OPT, that minimises the cost to the buyer, satisfying at the same time: Bayesian Incentive Compatibility (BIC); interim individual rationality.

Keywords: multi-unit procurement; volume discounts; incentive compatibility; individual rationality; optimal mechanisms; optimisation; optimal auctions; volume discount bids.

DOI: 10.1504/IJOR.2009.026244

International Journal of Operational Research, 2009 Vol.6 No.1, pp.70 - 91

Published online: 30 May 2009 *

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