A theory of cutoff formation under imperfect information
Management Science
Supply Contract Competition and Sourcing Policies
Manufacturing & Service Operations Management
Costly Bidding in Online Markets for IT Services
Management Science
Note on Online Auctions with Costly Bid Evaluation
Management Science
Management Science
Supply Disruptions, Asymmetric Information, and a Backup Production Option
Management Science
Optimal Procurement Design in the Presence of Supply Risk
Manufacturing & Service Operations Management
Electronic Commerce Research and Applications
Manufacturing & Service Operations Management
Two-stage mechanism design for heterogeneous e-procurement
Proceedings of the 14th Annual International Conference on Electronic Commerce
When Does It Pay to Delay Supplier Qualification? Theory and Experiments
Management Science
Combining Trust Modeling And Mechanism Design For Promoting Honesty In E-Marketplaces
Computational Intelligence
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We consider a manufacturer using a request-for-quotes (RFQ) reverse auction in combination with supplier qualification screening to determine which qualified supplier will be awarded a contract. Supplier qualification screening is costly for the manufacturer---for example, involving reference checks, financial audits, and on-site visits. The manufacturer seeks to minimize its total procurement costs, i.e., the contract payment plus qualification costs. Although suppliers can be qualified prior to the auction (prequalification), we allow the manufacturer to delay all or part of the qualification until after the auction (postqualification). Using an optimal mechanism analysis, we analytically explore the trade-offs between varying levels of pre-and postqualification. Although using postqualification causes the expected contract payment to increase (bids from unqualified suppliers are discarded), we find that standard industrial practices of prequalification can be improved upon by judicious use of postqualification, particularly when supplier qualification screening is moderately expensive relative to the value of the contract to the manufacturer.