Relationship preserving multi-attribute reverse auction: A web-based experimental analysis

• We experimentally investigated into the incentive-oriented auctions and bidding assistance.
• .
• Giving additional business as incentive increases supplier participation.
• The buyer gets higher utility in incentive-oriented auctions.
• Providing incentive improves buyer–supplier relationship.
• Bidding assistance to improve supplier utility is found to be ineffective.

Repeated use of reverse auction often degrades the buyer–supplier relationship. Theoretical studies show that providing incentive to the losing but competing suppliers can keep them interested to participate in future auctions thereby maintaining a healthy level of competition. We conduct web-based experiments to validate this theoretical observation in multi-attribute reverse auctions. We compare incentive-oriented and standard multi-attribute reverse auctions and demonstrate that the results in the laboratory setting corroborate the theoretical findings. Adopting incentive-oriented mechanism, the buyer is able to provide better utility to suppliers while protecting her own. We conclude that such a mechanism can reduce the negative perception of the suppliers and help build better buyer–supplier relationship in the long run.