Multi-attribute Procurement Auctions and Negotiations: An Experimental Comparison

Successful procurement involves vendor selection through appropriate market mechanisms. The advancement of information technologies has enabled different mechanisms applicable to similar procurement situations. Advantages and disadvantages of using such mechanisms remain unclear. The present study compares multi-attribute auctions and multi-bilateral negotiations in e-procurement. It carries out online experiments to examine and compare the effects of these mechanisms on the process and outcomes. The results show that auctions are more efficient than negotiations in terms of the process, while the two mechanisms outperform each other on the outcomes. Auctions outperform negotiations in the buyer's gains with the sacrifice of the supplier's profit. The buyer and supplier reach more optimal but less efficient contracts in auctions than in negotiations, and the contracts are more balanced in negotiations than in auctions. The findings provide implications for practice and future research in selection and use of these mechanisms.