Procurement decision making mechanism of divisible goods based on multi-attribute auction

Multi-attribute auction enables negotiation on several attributes in addition to the price such as quality, quantity, time of delivery and service levels. Most of the existing multi-attribute auction mechanisms are designed by considering a unique good or indivisible multiple goods. This paper focuses on designing a multi-attribute auction mechanism for addressing the decision making problem of multi-attribute and multi-source procurement of a kind of homogeneous continuous divisible goods (such as coal, oil, electricity and gas). The suppliers’ optimal bidding strategies are discussed, and a bidding method named the minimum bid increment method is proposed to simulate the overall process of suppliers’ multiple rounds of bidding. Theoretical analysis shows that our auction mechanism is an efficient mechanism, and satisfies the incentive compatibility conditions and the individual rationality conditions. Moreover, a multi-attribute auction example about the steam coal procurement is given to show how to implement our multi-attribute auction mechanism.

► We present an optimization mechanism for procurement decision making of divisible goods based on multi-attribute auction.
► A bidding method named the minimum bid increment method is proposed.
► A new method of selecting the suppliers is established based on multi-source procurement strategy.
► Theoretical analysis shows that our auction mechanism is an efficient mechanism.
► It provides a complete freedom competitive environment for trading divisible goods.