A multi-attribute reverse auction for outsourcing

In an outsourcing economy, a set of parent-firms want to outsource one component each to one of the suppliers out of a set of suppliers, who each want to supply a maximum of one component. There is a finite set of attributes, each of which can take some finite values, which concern the parent-firms and the suppliers. Parent-firms have valuations for their components and suppliers have costs for supplying the component, both of which depend on the attribute values and are private to the respective parent-firms and suppliers. We propose a reverse auction algorithm for the outsourcing economy. Our reverse auction algorithm achieves nearly efficient allocation and the final prices are also nearly competitive. We investigate strategic behavior of parent-firms and suppliers in our auction.